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An unsecured business loan is one that does not require an asset to be used as collateral, or to “secure” the loan. Because you’re not borrowing the money against an asset, the lender will typically assess your business’ cash flows and turnover, trading history, and creditworthiness as part of your application.
At iSelect we’ve partnered with Valiant to make it easy for our customers to easily compare unsecured loans. Click here to begin your unsecured loan application with the friendly team at Valiant.
The short answer is, it depends. A fixed rate unsecured loan can provide the security of knowing exactly what your repayments will look like for the term of your loan. This can provide some predictability in your business planning, and also shield you from any unexpected hikes in repayments if interest rates increase.
That said, with a variable rate loan, you open yourself up to benefit from any drops in interest rates, which could lower your repayments. However, there is no way to know for sure when and if interest rates will drop, so it comes down to both personal preference, and what’s suitable for your business.
Unsecured loans aren’t typically used to purchase assets, but rather to assist with your business’ working capital.
If you run a clothing store, you need clothes on the racks, and if you run a café, you need beans for that coffee machine. An unsecured business loan can assist with purchasing stock and inventory so that you can continue selling and keep your customers happy.
One of the most exciting parts of running a small business is watching it grow. However, expansion can be a capital-intensive exercise for business’s still finding their feet. Looking to expand or refurbish your workspace? Hiring new staff? Need money for a new marketing campaign? An unsecured loan could be a viable option.
Maybe you’ve had an unexpected or one-off cost affect your business’ cashflow? An unsecured business loan could help cover this one-off cost, without affecting your ability to run your business, continue operations, and pay staff.
Need a new coffee machine for your café? An unsecured loan can be used to finance the purchasing of an asset. That said, secured loans are more commonly used to finance the purchase of physical assets. A secured loan is where an asset (such as the one you’re purchasing) is used as collateral for the loan. Whether or not a secured or unsecured loan is suitable for purchasing equipment or other physical assets can depend on a range of factors, such as the kind of asset, and the loan value.
Unsecured loans can be a great option for some businesses looking for to finance their working capital. Here are some of the benefits worth considering:
That said, even unsecured loans have their downside. Here’s a quick summary of some of the disadvantages worth considering:
There are a range of unsecured loan features which can differ between lenders.
Some lenders can process your loan in as little as 24 hours, getting you the funds you need, when you need them. This turnaround time can differ between lenders and loan products, so it’s a good idea to gauge which lenders typically process loans the fastest. The team at Valiant can provide guidance in this area throughout your application process.
At iSelect we’ve partnered with Valiant to make it easy for iSelect customers to find a business loan product that suits their business. Valiant compare a range of products from over 80 lenders across Australia, and can manage the process of finding and applying for your finance solution, as well as settling funds. Get started comparing online today!
Last updated: 28/01/2021