We spoke with Bernadine Geary, Director, Cashflow Finance at Fundamental Business Finance, who provided some insights to the...
Top 5 reasons to consider unsecured business loansNick
Lend.com.au have written a great article which outlines some of the reasons why businesses should consider unsecured business loans. There are many finance products out there such as invoice financing, so it’s important to do your research and identify the best solution for your business needs.
If you’re looking for business finance, you’re probably busy weighing up your options. Should you approach your bank for a traditional secured business loan? Look for an angel investor to take an equity stake? Try peer-to-peer funding? Or head to the alternative lending market for some other form of business loan? While there are many financing options to consider, there’s actually a clear favourite among Australian SMEs: the unsecured business loan. Here’s are the top five reasons why.
1. Unsecured business loans are available to most SMEs
While bank loans may be the lowest-cost option, they can be very hard to come by. Generally, only businesses that meet strict criteria qualify – so unless you have assets to offer as security, a high credit rating, a minimum turnover and up to three years’ history of profitable trading, you may find a bank loan completely out of reach. There are no such access barriers with unsecured loans. With so many lenders out there, the lending criteria are much lower. Start-ups may still struggle, but most SMEs with six months’ trading record will qualify. Even if your business has a low credit rating you may be able to access an unsecured business loan (at a price, of course).
2. Applying for an unsecured loan is so easy
If you’ve ever dealt with a high street bank, you’ll know that nothing is straightforward. Applying for a business loan is no different. Even before you start filling out forms you’ll need to prepare business plans and cash flow forecasts, collect extensive documents to prove your financial capabilities and create a strong business case for taking out the loan. With an alternative business lender like Lend or UnsecuredBusinessLoans.com.au the whole process can be completed within hours. Many have an online application process – simply complete the form, upload your supporting documents, and press ‘submit’.
3. You can get an answer the spot
Getting a business loan through a fintech lender can be extremely quick. So if you need funds quickly to keep your cash flow steady, or there’s a killer opportunity and you need to act fast, an unsecured loan could be the answer.
If your application is straightforward you may get immediate approval. You could even have the funds in your account within hours. Even if your application gets referred to an advisor you can expect it to be assessed quickly, after a follow-up call for additional information. In contrast, banks can often take weeks to assess a business loan application.
4. You don’t need to provide collateral
With an unsecured loan, you don’t have to offer up business or personal property as collateral for your borrowings. Even if you have assets you could use (and many SMEs don’t) there are drawbacks to offering them as security. Once a bank has a mortgage over your property, for example, you won’t be able to sell or replace it without getting the lender involved.
Although an unsecured business loan will be more expensive, it leaves you with flexibility and control of your assets. Be aware, though, that as the business owner you may be expected to guarantee the loan – which means you’ll be personally responsible for meeting repayments if your business defaults.
5. There’s such a wide choice
There’s a limited number of high street banks offering a fairly standard set of business loan products. But the Australian alternative finance market is booming, and there are lenders out there to suit most businesses. Even if your needs are very specific – for example, your income fluctuates and you need to match your repayments to your cash flow – there’s a good chance you’ll be able to find an unsecured business loan with the flexibility you need.
There are some lenders that specialise in particular industries or business models, who may be able to offer you a favourable deal or other benefits.
Be careful though, because alternative lenders don’t have to conform to the same strict regulations as banks. Be sure you understand the full conditions and requirements of each loan before you commit. If in doubt, seek professional advice.