Secured versus unsecured business loans

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As a small-business owner, its often tricky for you to control when the need for additional funds may arise. In the past, lending options have been limited and when that need for cashflow arises, it would’ve been from one of the big four banks in the form of a secured loan.

However, there are now unsecured lending options available to business owners that can provide a fast, efficient and more amenable alternative to your bank. If you’re considering applying for a business loan, it is worth considering the options available to you from both traditional and non-bank lenders.

Secured business loans

Secured loans, most often provided by banks or finance companies require some form of property as security that your loan will be repaid. Types of security, often called collateral, will most likely include; family home, car or boat which is owned outright, or a percentage of ownership within your business.

If you were to fail in your responsibility to repay your loan, the bank is then entitled to take ownership of that collateral security in order to recoup the loss incurred. Moreover, if the funds they raise from taking ownership of the collateral do not cover the full amount owed you could still find yourself with an outstanding debt.

Secured loans will usually benefit from competitive interest rates, fees and charges as the risk for the lender is reduced by the promise of collateral. It is worth nothing however, this is not always the case. The flip side of that for you is the risk of losing your family home and the time it can take for the bank to complete valuations, draw up mortgage documents etc.

Unsecured business loans

The requirements from lenders are greatly different for unsecured business loans. You are generally not required to provide any collateral, as a result unsecured business loans are more flexible but will likely come with a higher cost structure. This is because the financier is taking on greater risk. Unsecured business loans are assessed differently with both the current health and future potential of the business being taken into account rather than just the strength or weakness of the businesses credit rating and previous year financials.

Is a non-bank lender right for me?

Business owners should review the pros and cons of loan products from both the big banks and non-bank lenders to find the best suited finance solution for their needs. No longer are business owners restricted to only working with four or five key institutions when it comes to securing finance for their business. They should include in these considerations the relative cost, ability to tailor a solution and speed when making their decision.

Would you like to explore non-bank lending options?

Unsecured Finance Australia is a specialist in the non-bank lending of unsecured business loan options in Australia. Founded in early 2015, the company has assisted in arranging funding thousands of businesses from around Australia with affordable, flexible fast unsecured funding options.

Rob Hayward, Director Unsecured Finance Australia, says, “We have seen a sharp increase in the number of businesses seeking small business funding in the last 12-18 months. The speed and flexibility we can provide with our lending solutions allow our clients to grow and support their increasing cashflow needs. We can also provide solutions for specific opportunities and projects and this has seen an ever-increasing demand over and above what our customers can achieve with their traditional banking source.”

Brought to you by Jack Jordan, Unsecured Finance Australia