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It’s been a tough few years for businesses in the UK. Between the confusion of Covid, changing trade laws with the EU and an expected economic downturn, there’s been a lot to contend with. Some of us need a little help, and that’s where unsecured business loans come in. Here, we’ll be taking you through all the information you need to know before applying for an unsecured business loan and what you’ll need to do to prepare. Don’t be put off by the name or the idea of owing money, as it can be a great way to invest in your business and ultimately increase your profits.
They’re a way to finance commercial projects that’s fast and simple, just the way you like it! You won’t need to put down property or collateral to get this kind of loan, which is perfect for small businesses operated out of a small shop or office. Unsecured business loans are offered by banks and have higher “risk and reward”, which means they’re seen as more dangerous for creditors, so they accumulate more interest than other types of loan. If you decide to apply for an unsecured business loan, you can do so online and you should receive a response within one or two working days.
This is a different way to get finance, and more complicated. The bank loans a business money with property as collateral, which will need to be viewed and valued. It should be worth around the same amount as you want to borrow. Then you’ll need to work out the details with a solicitor, and the whole endeavour takes longer. The benefit is lower interest rates, but we’ll talk more about that later. If you default on a secure business loan, the collateral will be taken and sold to cover the cost.
There are lots of reasons why a business might need some extra money. Some people use unsecured business loans to cover their bills or taxes or pay employees, while others invest the money in new equipment or open another branch. You could also use the money to level up your staff by sending them for additional training, or improve the customer-facing part of your business. You may need to explain your plan to the bank when you apply. Unsecured business loans are pretty flexible in regards to the amount of money loaned and the amount of time taken to pay it back.
There are plenty!
Of course, when you borrow money, you’ll have to pay it back. But unsecured business loans have other costs associated with them, which you’ll need to know about before you organise one. The specifics and amounts will vary with different lenders, but there are three main charges. The first is interest, which is set at a higher rate for unsecured business loans compared to secured business loans. It’s often around 5-20% per year. Because there are a lot of lenders around at the moment, you might be able to shop for a better offer. This can make things feel overwhelming, so you may want to consider your requirements before you start searching.
There’s also the application fee. Some short-term loans don’t have them, but if they do apply they’re usually worth about 1% of the initial amount borrowed. If you pay your loan back on time, those are the only two fees you’ll need to worry about. Some banks will charge a missed payment fee if they don’t get their money on time. These charges vary, so make sure you’ve read through the paperwork thoroughly. Also, as always, it’s a good idea to get copies to refer back to if necessary.
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Check your affordibility with our Business Loan calculator and make an informed financial decision.
Unfortunately, there are some downsides to getting this type of financing. These are:
There’s not a flat amount, but you can usually borrow up to 25% of your annual revenue. Usually, the minimum amount loaned out is £10,000 and the maximum can be over a million pounds! Think carefully about what you need, though, because you’ll be charged interest for whatever you get.
When banks look at offering loans, they rank the clients to determine interest rates. Type A is the best, as it has the lowest interest, and they’re usually offered to businesses which have been trading for more than five years, have good credit scores and high profits. Type B is in the middle and has more interest than Type A, and they’re usually offered to businesses which have been trading for two to four years, with a reasonable credit score and some profits. Finally, there’s Type C, for new businesses with credit issues. For a loan lasting between one to three years, Type A would expect interest of around 4-8%, Type B would expect interest of around 9-15% and Type C would expect interest of between 15-40%.
The application for a loan typically won’t take more than an hour. Most people will get a response within a few working days, but some companies proudly advertise the fact that they’ll approve you in 60 seconds. This is a red flag, and you should make sure that you’re not being screwed over by higher interest rates or other penalties before you accept their offer.
You can do it online, and you’ll need to have a few things to hand. These are: your credit score; the company’s credit rating; information about the company, including start date and turnover; personal information like your address and date of birth; and financial accounts including the past three months’ bank statements. Some lenders would also like to see a plan of what you’re intending to do with their money. The application forms to fill out typically don’t take very long – provided you’ve got this information! Anyone applying for an unsecured business loan would need to be able to prove that they’re making a 10% profit as a minimum.
Now you have everything you need to go out and apply for a unsecured business loan today! Remember to check any paperwork thoroughly and ensure that you’re not agreeing to anything you don’t want, and make sure to speak to someone if there’s something you don’t understand. Please be aware that everything discussed here is applicable to the United Kingdom, and may not work in other countries. Good luck!
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Lenders make small business loans, especially for small businesses that don’t have lots of assets or cash in reserve. That means that they often need to borrow money at affordable rates to solve short-term cash flow issues, or if they need to invest quickly in an opportunity. Small business loans tend to be flexible and offer choices of repayment options.
Lenders understand that small businesses face unexpected issues with their finances. You can use small business loans to help with temporary cash flow problems, like a late-paying client or an unexpected bill. You can also use finance to help your business grow and invest in the future. For example, when you want to buy stock and equipment to cover a rush of orders.
Lenders make small business loans to suit the needs of a range of small businesses. Whether you have a Limited Company, a start-up, or you’re a sole trader, there will be a loan that suits your needs. Some lenders offer loans for people with poor credit or unusual circumstances. That’s where using a loan broker like LoanTube comes in handy.
Small business loans can cover a variety of UK business needs. Secured loans usually give you lower repayments and let you borrow more, but you could lose your collateral if you can’t keep up repayments. Unsecured loans give you faster access to money with fewer checks. However, you pay a higher rate of interest and often can’t borrow so much. As well as these, you could choose Business Credit Lines or Revolving Credit Facilities. These types of loans give you access to credit, like an overdraft, but you don’t have to use all of it. Furthermore, you only pay interest on what you borrow.
Depending on the type you choose, your repayments could last a few months to up to five years. Usually, the shorter the term of the loan, the greater the repayments are. Most people want to pay their loans off as soon as possible, however, it’s often better to have affordable monthly repayments for a longer term than struggle with fewer, unaffordable repayments.
You can find it hard to get finance if you have bad credit or you’ve been turned down by lenders in the past. However, some lenders specialise in bad credit loans and will give you finance if they are happy that you meet certain criteria. That’s when using a loan broker, like LoanTube, can be helpful. LoanTube will search the market for you and advise you on lenders likely to give you credit, saving you time and applications.
We know the loan market can be confusing. There are so many lenders and loan products, it’s hard to know where to start, and no one wants to be turned down for credit. When you choose a loan, you need to make sure the repayments are affordable. You also need to know what will happen if you can’t keep up repayments, or if you want to repay early. LoanTube explains the different options open to you and we give you our expert advice.
If you need money fast, you could get a quick loan within 24 hours of applying, as long as you meet the lender’s requirements. Often, repayment interest will be higher than other small business loans and you may need to repay what you owe more quickly.
LoanTube works with many lenders across the United Kingdom. You could borrow between £5,000 and £500,000.
LoanTube helps UK firms access business finance through multiple direct lenders. We are an introducer and do not provide loans ourselves.
Think carefully before securing debts against your home or your assets. Your home and assets may be repossessed if you fail to keep up with repayments on debts secured against it.
All loan approvals & quotes are subject to credit checks and affordability requirements by lenders. If your business meet the lender’s criterion, you can borrow the money. We as a broker make an attempt to process your application with the most suitable lenders in our panel.
LoanTube is a credit broker and not a lender.
Warning: Late repayment can cause you serious money problems. For more information, go to MONEYADVICESERVICE.ORG.UK
The rate you are offered will depend on your individual circumstances.
Representative APR Example: Amount of credit: £50,000 for 24 months at £2,339.38 per month. Total amount repayable of £57,348.69 Interest: £7,348.69 Interest rate: 14.4% pa (fixed).
14.4% APR Representative. Loan term lengths between 3 and 60 months.
