There are many different ways to get a loan. We’ve talked about a number of them in these blogs, and you’ll find even more on our website. However, the financial process has another part to it – security. Security is a deceptively complex topic, with a lot of different interpretations to be had. So, here’s another entry in our series of finance myth-busting – demystifying the terror of unsecured loans.
The traditional image of an unsecured loan is that the idea of a loan without property to secure against it sends lenders rocketing out of bed screaming in the middle of the night. Now, it’s certainly true that an unsecured loan might be more limited in scope and options than a secured one, but that by no means makes them a “poison pill” that lenders will avoid at all costs.
The biggest issue with an unsecured loan is, of course, that there is nothing guaranteed against it. This does limit what you can do with an unsecured loan – lenders are understandably reluctant to do high-value ones in the absence of security. However, that doesn’t make unsecured loans a pointless task. Lenders are still open to providing unsecured loans, and it’s still possible to get six-figure loans that are unsecured. If you can prove that you have a solid business model, and can be trusted to make your repayments on time, then you still have a chance of finding finance, even if you may lack security.
Schemes like the Enterprise Finance Guarantee Scheme are opening up the finance world to those who might have great ideas but no resources. Unsecured loans are likely to be a big part of that going forward – small businesses should definitely not discount them!