The idea of unsecured business loans may conjure thoughts of a desperate situation. A loan of last resort. A business with no business. Exorbitant interest rates and unfeasible repayments. Something to be sought only when you've run out of all other options. The reality is, while some of those worst-case scenarios may apply for some businesses applying for an unsecured loan, in many cases, there is plenty of positives that accompany this type of loan. Unsecured business loans are a very important product in the commercial loan sectors and used by businesses of all sizes for a wide range of purposes. Many businesses use unsecured finance on a regular basis with an ongoing line of credit or loans for commonly occurring operational expenses. e. Some utilise this type of loan to capture and capitalise on opportunities, foster ground-breaking ideas, and products and deliver innovative new products to market. There are sure to be great business success stories that have grown from ‘unsecured’ beginnings. We offer unsecured business loans to many different sizes and types of operations across multiple industry sectors as an essential financial tool to achieving business growth.

Security v Collateral v Guarantee

Some forms of business finance are loans that are secured against assets being purchased. Some examples include Chattel Mortgage for trucks and equipment loans and Business Car Leasing. Some other forms of commercial loans are considered as unsecured business loans. Unsecured refers to a loan not being secured against a physical, tangible asset. They can be offered based purely on the creditworthiness of the business. However, while not being technically secured against an asset, some form of ‘back-up’ may be requested by a lender. Lenders may request businesses provide some other form of collateral against the loan or some form of guarantee. These may be assets as held in the name of the business or business owners/directors. Alternatively, the business owner may personally guarantee a loan by providing their personal assets such as property as collateral. During the coronavirus pandemic, the Federal Government introduced a stimulus measure that involved guaranteeing a percentage of unsecured loans to small businesses. These loans were issued, subject to eligibility criteria, by major banks but guaranteed by the government. More information here. In arranging an unsecured business loan, Business Finance works with individual businesses to structure a deal that best meets the business needs.

Versatile Finance Products For Businesses

So what can an unsecured business loan be used for? The purposes can be far-reaching but may include:-

• Investment funds to grow a business.
• Cover shortfalls in operating expenditure.
• Cost of services where a tangible asset is not available for a security. These may include consultant fees in regard to preparing a large tender or contract, legal fees surrounding an application for a trademark or other contractual arrangements, consultant fees to design and develop new systems for the business, and staff training and development.
• Purchase of stock for the business, perhaps as a line of credit for a retail business.
• Development and activation of marketing initiatives and/or development of websites and other digital enablement measures.
• Moving to new premises where significant monies are required for rent in advance, bonds, and other upfront costs. This would be differentiated from say fit-out costs that can be financed through a business equipment loan.
• New product research and development expenses.
• The purchase of assets where a lender does not accept the goods being acquired as suitable security against a Chattel Mortgage or other secured form of finance.

Plus many other purposes. If you have a requirement that you need finance to cover, please reach out to us and ask if that purpose would be eligible for an unsecured loan.

Business Loan Borrowing Limits

Different lenders will have minimum and maximum limits they will offer for unsecured loans. This may be from around $5,000 and in excess of $500,000 for large companies. While the loan amount is considered and approved on an individual basis, there is a general rule of thumb in regard to estimating how much a business may be approved for. In calculating the permitted loan amount, it may be based on the business turnover or free cash which is the funds available after basic expenses are deducted. Typically, lenders may allow an unsecured loan for up to 80% of the business's free cash.

Compare Business Finance Rates and Use Online Calculator

Due to the higher risk factor as there is no security provided, the interest rate on unsecured loans is higher than for secured loans. Refer to our business finance interest rate comparison chart to see the differences across our loan portfolio. To calculate possible repayments on your proposed unsecured loan, use our business loan calculator to calculate repayments at varying interest rates.

Applying for an Unsecured Business Loan

As with all the commercial loans that we arrange, unsecured loans are individually handled, negotiated, and structured. Using a business finance broker through us can yield many benefits as a key to achieving a workable unsecured loan solution is connecting with the right lenders. Many banks and lenders do offer unsecured loans but not all are flexible and negotiable when it comes to the specific terms and conditions of this type of loan. We can provide access to a wide range of lenders including those that specialise in specific industries and specific loan categories such as unsecured commercial loans. As this type of loan is based on creditworthiness and a proven ability to repay the loan, applicants will need to provide solid financial records. Your broker will work through the application procedure with you and advise the documentation you will need to provide.

Options and Alternatives

If you still have uncertainty about taking on an unsecured business loan, you may like to speak with us about other options and alternative forms of business finance to meet your requirements. These may include:-

• Refinancing and restricting existing loans and debts to reduce outgoings and free-up cash flow.
• Ways to reduce debt.
• Specific finance products such as insurance premium funding, lender overdraft, and invoice funding.

To discuss a financial solution, contact us  on 1300 000 033

DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.