The word unsecured makes it clear that any monetary loan that is not secured against any collateral is an unsecured loan. All banking and financial institutions offer unsecured loans in different forms carrying different terms and conditions. The unsecured loans may be in the shape of credit cards, personal loans, bank overdrafts, unsecured corporate bonds and lines of credit or credit facilities.
The financial markets of the world and particularly U.K. are congested with investors competing and vying for your business and to lend your business money. You benefit to get the best deal because the investors are engaged in offering the lowest possible interest rates through auctions in the open market.
UNSECURED BUSINESS LOAN AND RISKS
Investors are willing to take the risks of lending money without any sort of backing to secure the loan. The charm for the investor to obtain your business is to charge higher interest rates as against interest rates of secured loans. Conversely, if you default, the unsecured lender can sue you for breaching the contract and pursue judgment against those assets or properties which are not pledged to other lenders. But any secured lender has priority over an unsecured lender for legal reasons. Hence, the higher risk associated with unsecured loans and the chance of the debt being uncollectible, their interest rates are higher in comparison to secure loans. However, the agreed interest rate varies, which is dependent upon the borrower and the loaner.
FUNDING FOR SMALL BUSINESSES
If you are interested in starting your own business on a small scale, in UK, you are likely to face many obstacles to meet the business capital demands and might not find sufficient financing options immediately. This can hinder the growth and expansion of your business. In most cases, getting approved for a loan for your business doesnÂt necessarily mean immediate money in your hand, when you need it the most. For such small business owners, easy-to-obtain unsecured loans are a viable option to ensure necessary cash-flow for the business and especially at the most crucial stages.
SECURING OF UNSECURED LOANS
Due to the speedy access to such loans and comparatively simpler qualification process, small businesses loans are gaining popularity. The best part about these unsecured loans is that credit is not the most important factor during the qualification process. What matters the most is business potential and health and capacity to generate profit. But still a strong business credit history can increase your chances of qualifying for the loan. The efficiency of small business loans can be seen from the fact that small business loans can be approved within 24 hours and access up to £500,000 can be given in only 5 days.
The usage of these loans is flexible and is entirely dependent upon you. There are numerous ways by which these loans can benefit your business.You can use them for marketing your business services, delivering new contracts, paying for the required equipment and buying or renting work space. An unsecured loan can secure your business.