Since the global economy crisis of 2008 and 2009, you may be forgiven for thinking it’s near impossible to raise business capital – especially Unsecured Business Loans.
Of course, everyone knows ‘bad debt’ caused the housing crisis, the bubble burst and the global downturn affected everybody’s access to finance and credit. Heck, even if the banks are going bust and out of business, what hope is there for the small guy, the sole trader, or other Small to Medium Enterprises (SMEs)?
Well, the good news is that the situation is nowhere near as bleak as it seemed a few years ago. Business capital is available, even to small businesses, and even on an Unsecured basis – but you have to search properly for it.
Then again, we never said it was going to be easy, did we? Don’t we all know, nothing worth having comes easily?
Well, we’re about to prove that statement incorrect – at least for gaining Unsecured Business Loans for SMEs.
What is the difference between Secured and Unsecured Business Loans?
Simply put, security is a term used in funding circles which is aimed to persuade the lender to lend money. The more security an individual can put down, the more likely they are to receive finance as the lender has some collateral or ‘skin in the game’.
So, if a prospective borrower offered up their car, property or other business asset as ’security’ a lender is more likely to lend money – or increase the amount – because should there be a default, the security can be seized as an asset against the debt.
Lenders are more likely to ask for security if they consider the risk is greater, such as company with a short trading history, or not much profit or capital in the business.
Likewise, an Unsecured Business Loan has no security given against default, in other words the borrower puts up nothing as security.
But surely an Unsecured Business Loan will be either more difficult to find, or at a less competitive rate?
Although this may be the case in some instances – as there is an increased risk for the lender – it doesn’t follow that it is true in all cases.
Because the global economy has strengthened over the last few years, lenders are taking a more inclusive approach to financial risk and consequently have opened up several avenues whereby SMEs can access Unsecured Business Loans.
Lenders realise today’s companies are far more entrepreneurial, and with startups and SMEs needing capital more than ever, the rewards for lenders taking risks are accordingly far greater.
Lenders are far more imaginative in the financial vehicles and products available on the market, such as crowdfunding (where the capital is sourced from non-financial institutions) and so can offer competitive deals to SMEs to assist their cashflow.
For example, a lender may offer an Unsecured Business Loan with no security by taking a greater interest in the Business Plan and likely growth of a company. The Lender may choose to offer staged increases in rates of interest, starting off low and increasing as the business and profitability grows.
Why a broker is your best choice for Unsecured Business Loans
Brokers can offer the most competitive deals, as they are not tied to one lender, and often can offer Unsecured Business Loans to SMEs when traditional High Street lenders cannot – or will not.
Because brokers have more options to provide finance, they can also offer more competitive deals to SMEs to suit their situations, especially regarding Unsecured Business Loans.