Benefits of Unsecured business loans
Unsecured business loans help arrange capital for several business purposes including business expansion.
The most preferable aspect of this type of loan is that there is no charge on any business asset. Assets can be
freely disposed off. The following article illustrates important issues that one must watch out for while
applying to an unsecured business loan.
UK Secured loan, unsecured loans, mortgages, unsecured business loans
Secured business loans, used as a source of business capital, are disadvantageous not only because they can
lead to repossession of asset if repayments are not made. Secured business loans come with many
restrictions imposed by the loan provider. The loan provider, for instance, will insist on a particular debt-
equity ratio in order to safeguard the amount lent. This limits the entrepreneur’s control over major decisions
An unsecured business loan, on the other hand, presents no such restrictions. The enterprise has to pledge no
asset for repossession in case of non-payment. The assets are thus free of any charge, and can be disposed
off as one desires.
The prime customer group employing <a
href="http://www.loansfiesta.co.uk/unsecured_loans.html">Unsecured business loans</a> constitutes of
entrepreneurs who prefer not to attach the business assets to any obligation. Businesspersons, who have
undergone bad credit history, also make use of this category of loans. Such businesspersons and enterprises
are known as problem cases. Failure to pay certain debts in the past leads to county court judgements, and
bankruptcy, which in turn leads to bad credit history. Such businesspersons are disadvantaged in secured
loan deals. Unsecured business loans however, present immense financial opportunities before borrowers;
particularly where the loan amount desired is small.
The amount received through unsecured business loans will be used for business commencement or
expansion purposes, assets and equipment purchase and refinance, and to restructure finances. Some
businesses use the loan proceeds as a working capital. Still others would use the unsecured business loan to
finance a particular consignment. The repayment of this type of loan will be due immediately after the
entrepreneur gets payment from the consignee, or any date decided.
As part of an agreement between loan provider and the businessperson, cash will be transferred for use by
the business. The terms and conditions of the unsecured business loan will have to be drawn through
consultations between the borrower and the loan provider.
APR is an important issue and needs to be discussed in detail. Being unsecured, the unsecured business loan
is more expensive. The interest rate charged will be on the higher side. Risk is a matter of perception.
Different lenders may look into a particular case differently. APR would be decided on the basis lender
perceive risk involved in a particular loan request.
The principal issues you need to watch out for during the decision making process have been illustrated
This is the amount charged by loan providers as a compensation for the service rendered. This is referred to
as points. Points, in some cases, are deemed to be investments. The borrower agrees to pay increased points
in exchange of a better rate of interest. However, a comparison with the fees charged by other competitive
lenders is a must. Fees constitute a major part of the cost. Hence, fees will be an important selection criteria.
Most lenders will not agree to a prepayment for the first 3-5 years. After the conclusion of the period, the
entrepreneur can seek premature settlement of the loan account. This will enable borrowers to get rid of the
loan without incurring any redemption penalty.
This is the period for which loan providers will allow borrowers to extend monthly repayments. For
instance, if the monthly repayment is due on the first of every month, late payments up to the fifteenth of the
same month will not be deemed late. Entrepreneurs must negotiate a better grace period from the loan
Late charges constitute the penalty for delayed payments. These are open to negotiation.
Borrowers can demand reasonable solicitors’ fees. Solicitors’ fee implies that the borrower is required to
refund the lender’s fees and costs that were incurred on enforcing or recovering loan. This will become due
when the borrower does not repay unsecured business loan in full.
Unsecured business loans help garner the much needed resources for business growth. The organisations
where the need for finance is urgent will find unsecured business loans the best available option.
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