From moving to bigger premises to putting more into marketing, there are lots of reasons why a business might look to apply for finance. Getting a secured business loan can be tricky for those without personal or commercial assets - but it shouldn’t be a reason to give up on the search to access funding.

An unsecured business loan is a good alternative and offers a quick and easy way for businesses to secure the cash injection they’re looking for without having to offer security. On this page you can read more about how unsecured business loans work, who they’re suitable for and what they could mean for your business.       

What is an
Unsecured Business Loan?


As the name suggests, an unsecured business loan is a source of finance for businesses that can be accessed without having to be secured against company or personal assets.

Whereas with a secured loan a lender will use assets such as commercial property, residential property or equipment as security in case a borrower can’t make repayments, these assets aren’t required or at risk with unsecured business loans.

Lenders may place more value on your trading history or ask for a personal guarantee that is not tied to a specific asset because of this lack of security.        

 
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Unsecured vs secured business loan
what’s the difference?

As mentioned above, the key difference is that unsecured loans are not backed up by any asset. This makes unsecured business loans more accessible than secured loans for companies who don’t have many tangible assets.

There are other differences to note as well, however. Secured loans can take time to go through as your assets are valued, whereas unsecured loans are often a quicker source of finance due to there being fewer legal processes involved.

That being said, if you’re looking for a larger loan amount – over £150,000 for example – you may struggle to access it without providing some security. You may also pay more interest in the long run with some lenders due to there being a higher level of risk involved on their part.

Who are they suitable
for?


There’s no restriction on what you use the funding for, making an unsecured business loan an attractive option for businesses that don’t have assets to offer as security and for directors that are tenants. Many modern businesses operate from rented offices with limited assets beyond computer equipment, while more people are renting than ever before - which makes a secured loan less accessible as a source of finance. 

Their accessibility also makes unsecured business loans ideal for new businesses who are growing or aiming to grow,but haven’t been in operation long enough to build up tangible assets. You’ll need to have a minimum of one year’s financial accounts for an Unsecured Business Loan from Merchant Money.

If you’re looking for a small business loan, unsecured may be the fastest and easiest route. If you’re in need of a larger loan however or do have personal or company assets available, you may want to go for a secured loan with better rates.   


What are the advantages of
unsecured business loans?

A secured business loan will generally be the better option if you’re a homeowner or have company assets to offer. However, unsecured business loans still offer UK businesses without assets several benefits:

  • More accessible finance: You can still secure the funding you need even if you don't have any personal or company assets.

  • Quick turnaround time: You could access an unsecured loan faster as there are less processes and legalities to go through than with a secured loan.

  • Less up-front costs: Valuations and legalities around assets often require up-front payment.

  • Smaller loan amounts: Borrow from £5,000 up to £150,000 with a personal guarantee, without needing to offer assets as security.


Does my business
qualify?

We offer this product to all UK-based sole traders, limited companies or partnerships. If you think your business could benefit from an Unsecured Business Loan from Merchant Money, you could qualify if you meet the following criteria:

·         Minimum annual turnover of £100,000

·         Minimum of one year’s financial accounts


What interest rates do you
charge?

Interest rates for our loans typically vary from 1.5% up to 3% based on the loan term, the amount you borrow and the profile of your business.

We aim to make responsible credit decisions based on a wide range of criteria and credit data, so we’ll assess your application individually and look to agree an interest rate with you before starting the loan term.


 

How does an unsecured business loan
work?


Other than the key differences discussed above, they work in much the same way as traditional loans. You apply for the amount of money you would like to borrow as a business, and, if approved, you’ll receive the funding you need as a single payment.

You’ll then repay the loan amount within an agreed term – from 3 to 36 months with Merchant Money – plus a small amount of interest on your outstanding balance.    

You’ll typically need to sign a personal guarantee as part of your application. This is a written commitment from a company director – plus other key stakeholders in some cases - to personally pay off the loan if the business defaults on repayments. Personal guarantees provide money lenders with extra security in the absence of assets.


What are the
disadvantages?

There are a few things to consider before you decide if an unsecured business loan is right for you. Firstly, you’ll need to think about whether the upper limit is enough to fund what you need. If not, you’ll probably need to offer some security to access a higher amount.

You're also likely to end up paying more for an unsecured business loan in the long run as interest rates are higher due to the greater level of risk on behalf of the lender.

It’s also understandable that some will see signing a personal guarantee as a risk, though they’re often required with both secured and unsecured options. You’ll need to consider the possibility of losing some of your personal finances if your business becomes unable to make the agreed payments against the loan. If you are not prepared to sign a personal guarantee, however, you may not be able to access the funding you need.


How much can I
borrow?

Our Unsecured Business Loans range from £5,000 to £150,000. If you need more funding for your business, we also offer Secured Business Loans up to £500,000. 

 

Will I need a form of security or a
guarantee?

You won’t need to offer security in the form of any asset for an Unsecured Business Loan from Merchant Money. We do however ask for a personal guarantee to confirm that, as the business owner, you will become personally liable for repaying any debt should your business unfortunately become unable to make the repayments.

How to get an Unsecured Business Loan
from Merchant Money?

The best way to apply is to submit an online application using the ‘GET A QUOTE’ button on our website. We’ll ask you to provide us with a few details, then once we’ve got everything we need, we can give you an answer within 24 hours.

If you’d prefer to speak to us over the phone, you can call our friendly team on 0800 848 8480 or request a call back for a time that suits you.


Why choose
Merchant Money?

If you’re looking for the best unsecured business loan for you, here’s a few reasons why you should consider Merchant Money:

·         Get up to £150,000 within 24 hours to grow your business without offering up assets

·         Only pay interest until the day you settle, with no hidden charges or fees

·         We approve 90% of applicants

·         Top-ups are available if you make repayments on time and your business continues to perform

·         We’re trusted by independent customer reviews

·         We’re authorised and regulated by the Financial Conduct Authority (FCA)

If you’re looking for a fast and accessible source of finance for your business, an Unsecured Business Loan from Merchant Money could be just what you need to keep growing.

Merchant Money is a member of the Federation of Small Business (FSB) and a Patron of the National Association of Commercial Finance Brokers (NACFB). We are uncompromising in our principles and practice ethical and responsible lending at all times.

Frequently
asked questions


When it comes to securing business finance, it’s vital to make an informed decision. We’ve answered some of the most commonly asked questions to help you in that task.

When do I qualify for a business loan?


We welcome all UK based sole traders, limited companies or partnerships. We require an annual turnover of £100,000 and a minimum of one year’s financial accounts.

Read more

How much can I borrow?


Our Unsecured Business Loans vary from £5,000 to £150,000 and we offer Secured Business Loans up to £500,000. We also offer regulated business loans to sole traders up to £25,000.

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How long can I take the loan out for?


We offer terms from 3 to 36 months, You can always repay early. We only charge interest on the outstanding balance.

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