There are times when your business will need to obtain a loan. You may need to buy more inventory or take advantage of a unique opportunity. But if you have no collateral, you will find it incredibly difficult to secure a business loan from a traditional lender. If a bank or credit union won’t entertain you, you can always get in touch with an alternative lender.
How They Work
Unlike most loans you get from conventional lenders, an unsecured business loan doesn’t require any collateral. This means the lender cannot take your business or any other personal assets if you cannot pay back. An unsecured loan is given out too many businesses who need funds but cannot show any collateral to back them up. Most of the time, companies get in touch with alternative lenders when trying to get an unsecured loan.
Securing a Business Loan
The problem with having no collateral is that the bank cannot take anything off you if you fail to make payments. If you have no security, they are the one’s taking a massive risk. This is the main reason why so many traditional lenders won’t approve business loans that are unsecured. If the borrower suddenly cannot pay, the lender cannot take any assets to recover the debt.
If you have been with a bank or building society for many years and you have a good relationship, you may be able to get an unsecured loan, granted you have paid back secured business loans in the past without any issues. If you don’t have this kind of relationship, and many of us don’t, there is an exceptionally low chance a traditional lender will approve your application.
Building a solid relationship with a lender can take a lot of time and money, if you need funds now, this isn’t really a viable option. However, there are other ways to get a loan. Many business owners contact alternative lenders and apply for unsecured business loans. They aren’t major banks, but they provide a range of other useful services that traditional lenders don’t.
If you need a quick injection of cash, going down the traditional route of applying through a bank is not going to work, especially if you cannot offer any collateral. Conventional money lenders won’t take the risk and your application will be denied. When looking for an unsecured loan, it is important to find the right lender.