As many businesses trade upon their intangible assets, such as a consultancy trading on its contacts and knowledge, the traditional secured loan has ceased to be an effective product for many companies looking to grow.
As technology has allowed alternative finance streams to come online, in addition to some of the traditional lenders opening up to the possibilities that unsecured lending offers, there has been a huge increase in supply.
But what does this all mean for you? What do you need to be aware of? And can taking on an unsecured loan be right for your business?
Well, they’re usually more expensive due to the greater inherent risk to the lender, so you have to be sure that your cashflow is in good shape. However, as no valuations are necessary (you’re not securing the loan against an asset – be it property or plant), and with a shorter legal process you will get a decision much quicker than you would with a secured loan.
The two factors you have to weigh with importance are time and cost. You can’t have both. The secured route is longer, and you have to have assets to secure against the borrowing. If you want your financing arrangements sorted faster, and do not have assets to set against, then unsecured is well worth your time.
Ultimately, you have to be comfortable with any repayments that would arise from any lending, and that your business will and can support them. Using a good broker can make the process seamless giving you the time to focus on your business.