There are many choices when it comes to obtaining an unsecured loan for business.
Unsecured loans from banks
Most high-street banks will offer medium to long term business loans in both secured and unsecured varieties. Interest rates on unsecured loans will generally be higher and the bank will often make more vigorous checks of the borrowing company’s underlying financial health (a process known as underwriting).
Since the credit-crunch unsecured lending from banks has been more difficult to come by. But banks still offer very competitive interest rates and low arrangement fees so this route is still well worth investigating.
Unsecured loans from peer to peer lenders
Peer to peer lenders, like Funding Circle, Zopa and RateSetter, are a new breed of business lender which almost exclusively offer unsecured loans over periods of up to 5 years. Interest rates on peer to peer loans are similar to, often in fact lower than, unsecured bank loans but they usually come with arrangement or completion fees attached. The chief advantage over loans from banks is that there are very often no fees for early repayment.
Unsecured loans from specialist business lenders
There are now many companies competing with banks in the unsecured lending space, primarily offering unsecured short-term loans e.g. ezbob. The interest rates attached to these loans are often higher than with banks and peer to peer lenders but the lending criteria is less strict.
Unsecured loans from government schemes
The British Business Bank is a publicly owned development bank which guarantees loans for startup and existing businesses, enabling them to obtain unsecured loans from banks or other lenders at competitive rates. While the application process can be quite lengthy such loans are an excellent option for businesses who plan their borrowing well in advance.
Alternatives to unsecured business loans
Unsecured loans aren’t the only kind of finance available to businesses looking to expand or plug a temporary gap in cash flow.