Unsecured small business loans are becoming the go-to financing option for startups in need of business capital, but what do they entail? Take a look at some of the unsecured business loans available to Aussie firms.
The primary reason why unsecured small business startup loans are popular among business owners is mostly due to it having flexibility and various accessible features which are rarely present in more traditional lending options.
These fast business loans unsecured don’t require applicants to have a long-term credit history, making it ideal for startup owners who simply need a cash boost to help their business grow.
Unsecured business loans are further subdivided into five major types:
- Unsecured equipment and vehicle finance
- Unsecured line of credit
- Unsecured merchant cash advance
- Unsecured bank loan
- Unsecured term loan
Unsecured equipment and vehicle finance
Startup business owners who need additional funding for procuring equipment and vehicle necessary for their business may consider getting an unsecured equipment and vehicle finance loan from non-bank lenders. This kind of unsecured business loan has a longer paying term compared to other unsecured lending options.
Once approved, business owners avail of an equipment and vehicle finance loan amounting from AU$5,000 up to $300,000, depending on the needed amount.
SMEs do not have to worry about unsecured startup business loans bad credit since there is no need to have a stellar credit history to avail of this kind of unsecured loans. However, unsecured business loans have relatively higher interest rates compared to loans coming from bank lenders.
Unsecured line of credit
An unsecured line of credit, also known as a revolving line of credit, is a more flexible lending option allowing business owners to have access to a specific amount of funds and redraw these funds up to the total limit of the credit facility provided by the alternative lender.
Unsecured line of credits is ideal for businesses that are characterised by irregular monthly cashflows. After availing of an unsecured line of credit, business leaders can choose to use all or a portion of the loan, pay back the amount and use it over and over again. Business owners only have to pay the interest on the amount used from the loan.
Unsecured merchant cash advance
Unsecured merchant cash advances are ideal for small businesses that have regular merchant payments, such as credit cards and electronic funds transfer at point of sale (EFTPOS). Business owners don’t have to worry about their credit history when applying for this loan since most unsecured business loans have no credit check.
With unsecured merchant cash advances, non-bank lenders allows business owners to loan a specific percentage of their total merchant sales in advance. The loan is then repaid daily via a previously agreed-upon portion of the business’ future sales sourced from the merchant sales of the company.
Unsecured bank loan
While the majority of small businesses seek assistance from alternative or non-bank lenders when availing an unsecured business loan, a handful of banks actually offer unsecured loans that cater to small businesses. The only difference lies in the fact that instead of coming from a non-bank lender, unsecured bank loans come from banks.
But before applying for an unsecured bank loan, keep in mind that banks tend to be stricter with their loan requirements. Startup business loans no personal guarantee is allowed since the bank still requires business owners to show an impressive credit history and other requirements before they can qualify for a loan.
Unsecured term loan
Unsecured term loans are business loans which must be repaid regularly over a predetermined period. Unsecured term loans require full repayment within six months up to a year, making it very ideal for businesses with regular monthly cash outflows.
Unsecured term loans are usually availed for a specific purpose, such as procuring extra capital for the business. Term loans allow business owners to secure the necessary business loan without having to risk other personal assets such as properties, which is usually the case for other kinds of business loans.
Ask the Experts: Does automation stack up financially?
By Christopher Overton
Opinion: How bad do things have to get?!
By Adam Zuchetti
Business lessons from the All Blacks
By Steve Stanley