As a small business owner, you understand how difficult it is to expand, remodel, or finance large additions to increase sales. If you want to make any progress in your niche, sometimes you have to invest more money than you currently have in your bank account.
But how will you secure a large loan without any assets? Was your business affected by the COVID pandemic? Unsecured business loans are a great option to finance your small business.
Types of Unsecured Business Loans
You can apply for a lump sum of cash or a line of credit. If you need a large quantity of money quickly to purchase a building or invest in new equipment, a small unsecured business loan may be more necessary. If you need cash for future business needs that have not yet been established, you may want to apply for a line of credit so you only borrow what you need.
These are two types of unsecured business loans that you can work with the lender to adjust and create a payback plan that you can achieve with lower interest rates.
Secured vs. Unsecured Business Loans
Before you apply for an unsecured business loan, you should understand the difference between an unsecured business loan and a secured business loan. A secured business loan requires you to offer collateral if you are unable to repay your loan. A secured business loan typically has lower interest rates as you have given the bank a property deed or bank account access if you cannot repay your debt.
On the other hand, an unsecured business loan does not require collateral. When you apply for an unsecured business loan, the bank or private institution will do a hard credit check. They will approve your application based on your credit score and the longevity of your business.
Prepare for the Application
If you need unsecured business finance in Australia, you should prepare for the application. The private or bank lenders will ask you what your plans are for the funds. Lenders will want to see your business plan to improve your business and the projections. You will also want to prepare documents showing your business’s record of income. What are your current and past profit margins and how will the loan increase your profit margin?
As stated previously, the longevity of your business is also important. Did you know that most businesses fail within the first three years? They will want to see how long your business has been running. It will lower the lender’s risk as the unsecured loan does not provide them with any collateral if you fail to repay the loan. You will impress lenders if you have all of your application materials prepared before consulting with them.