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An unsecured business loan allows your business to take out a loan without having to provide specific asset security. Great for businesses with no assets, or ones that don’t want to put assets up as security. As a general rule, interest rates will be higher with an unsecured loan.
When it comes to financing your business, there’s no shortage of options available. However, unsecured business finance is often misunderstood and surrounded by myths that can deter entrepreneurs from exploring this valuable funding avenue.
In this blog post, we aim to debunk these myths and shed light on the reality of unsecured business finance.
One common misconception is that unsecured business loans are riskier than secured loans because they don’t require collateral.
While it’s true that unsecured loans don’t involve pledging assets, this doesn’t necessarily make them riskier. Lenders evaluate applicants based on their creditworthiness and business performance, reducing the risk associated with defaults.
Some believe that unsecured financing options are only available to well-established businesses with a long track record of success.
In reality, many lenders offer unsecured loans to startups and small businesses. The key is to demonstrate your business’ ability to generate revenue and repay the loan, often through strong credit card sales or consistent revenue streams.
Another myth is that unsecured loans come with sky-high interest rates.
While interest rates can vary depending on your creditworthiness and the lender, they are often competitive with secured loan rates.
Additionally, the convenience and accessibility of unsecured loans can outweigh any slightly higher interest rates for many businesses.
Some people believe that applying for unsecured business finance is a complex and time-consuming process.
However, many lenders streamline the application process, making it efficient and straightforward. With minimal documentation and online applications, you can often get a response and access to funds quickly.
Unsecured business loans are versatile and can be used for various purposes.
Whether you need funds to expand your operations, purchase inventory, invest in marketing, or cover unexpected expenses, unsecured loans offer the flexibility to use the capital where it’s needed most. There are no restrictions on how you can allocate the funds.
While a strong credit history can improve your chances of approval and secure more favourable terms, having bad credit doesn’t necessarily disqualify you from unsecured business financing.
Many lenders consider a holistic view of your business’s financial health, including revenue and cash flow, in addition to your credit score. However, lower credit scores may result in higher interest rates.
We highly recommend talking to business finance specialists who can help you secure a loan even with bad credit.
Some business owners mistakenly believe that unsecured loans are only suitable for large funding needs.
In reality, unsecured financing options can accommodate a wide range of loan amounts, from small injections of capital to substantial investments. Lenders offer flexibility to match your specific financial requirements.
Unsecured business finance is a viable and accessible option for businesses seeking capital to support and grow their operation.
When used wisely, unsecured business finance can be a valuable tool for business growth and success. It’s our job to ensure you get the best deal at the right price.
If your business is looking to raise working capital or finance to support your growth objectives, Jones & Co. can help you explore options available to you from our trusted panel of lenders.Contact our team
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