Unsecured Commercial Loans

Overview

Unsecured commercial loans are short to medium term loans which are not secured to any company assets such as the business premises, or Directors residential property.

Bank overdrafts may also come under the category of unsecured business loans, although this is not always the case.

Unsecured business loans may be used to ease short-term cash-flow problems, purchase new equipment, fund acquisitions, or even support company marketing initiatives. There are no restrictions on the eventual of the money.

For young companies, or businesses with limited assets, the Small Firms Loan Guarantee Scheme may be an option. This is a UK Govt (DTI) initiative, managed by the Lender community.

Lending Thresholds

The minimum value of unsecured commercial finance that lenders offer can depend on the status of your trading entity.

For example, some Banks have different thresholds for Partnerships and Limited Companies quoting £25,000 and £10,000 respectively.

The maximum value of a small business loan is set at £100,000 amongst the vast majority of lenders.

Lending Terms

Unsecured commercial loans are typically written for between 1 and 15 years.

Unsecured loans in the form of overdrafts may be set to be reviewed annually, at a pre-agreed date, or on reaching a pre-defined threshold.

What Happens if You Do Not Keep Up Repayments?

If you dont keep up payments on an unsecured loan you could find yourself in Court and with a CCJ, but your house, or business premises will not be at risk.

The mitigation of risk is a major attraction of taking out an unsecured loan, and is often used to off-set the higher interest rate charges of an unsecured loan.

If Security Is Mandated...

If you simply have to provide a security before being awarded the loan offer then be sure to tie the security to the specific loan.

This is particularly important with loans from Banks holding your business bank account, as the security may be carried over to cover all of the company borrowings and all of its equities.

Improving Your Chances Of Getting The Loan

Businesslink recommend, in their Guide to Loans and Overdrafts, that you use a finance broker to raise your chances of success when approaching a lender.

The reason why Businesslink make this recommendation is because there is such a vast range of unsecured loans available on the market that it is very easy to make a mistake and pay much more interest than necessary over the life of the loan.