What is an unsecured business loan?
- An unsecured business loan is when a lender lets you borrow without asking you to commit any security. Many business loans are secured on commercial assets, personal assets or with a personal guarantee from a business owner.
- Unsecured business loans break free from the bureaucracy and inflexibility imposed by the need to give security. An unsecured loan can be arranged quicker and allows a business to move ahead faster. All Spotcap loans are unsecured.
Why do we offer unsecured business loans?
Spotcap has a unique risk assessment and credit scoring system based on our proprietary algorithm and backed by our expert underwriters. Our system studies your current business performance, using data taken from standard financial reports.
Using this data, we determine the level of risk associated with lending to your business, allowing us to make offers of unsecured business loans. Our unsecured loans help businesses across a range of industries and can be used for any purpose.
How can an unsecured loan benefit my business?
Clear, transparent pricing
Understanding unsecured business loans
Information about the unsecured lending you need to know
Unsecured business loan vs. unsecured line of credit
An unsecured business loan and an unsecured line of credit are alternative funding options based solely on a business’s creditworthiness, history and financial condition. These types of financing don’t require any collateral or personal guarantees, making them an attractive solution for healthy small and medium sized businesses that don’t want to tie up valuable assets.
An unsecured business loan and an unsecured line of credit are the most common non-collateralised financing options available to businesses. Each have their individual pros and cons, depending on what a business requires.
- Business loans operate as term loans, meaning they provide a single amount of credit and need to be returned within a certain timeframe. Even if the borrower doesn’t use all of the funding, they are obligated to repay the full amount with interest.
- Business loans are generally better solutions for long-term commitments (2+ years) when the borrower knows exactly how much additional financing is required and why. For example, if a restaurant owner wants to change location and needs funding to purchase property, a business loan is better suited to them.
- If a business wishes to repay their loan earlier than pre-arranged, the closing costs can be substantial and need to be factored in.
- When it comes to interest rates, business loans operate with fixed numbers and monthly repayments don’t fluctuate. While this makes it easier for businesses to plan ahead, it also means that their repayments can be higher in the long run compared to other financing options.
Business lines of credit
- Business lines of credit give a borrower more flexible access to funding. A lender agrees on a maximum amount of credit available to a business (e.g. £100k). From this, a borrower can withdraw as much or as little as they like, according to their business needs. This process is known as ‘drawing down’. A credit line is sometimes referred to as a safety net to cover a shortage of working capital.
- Obtaining a line of credit is more useful for shorter timeframes of up to 12 months – for instance, when businesses are experiencing spikes in growth or demand and would like to have available funds for unforeseen expenses.
- A business line of credit can sometimes be paid earlier than agreed without incurring additional fees.
- With a business line of credit repayment amounts vary month by month. Businesses pay interest on the amount of credit that’s outstanding. Once that’s paid back, the smaller the monthly payments become.
A business loan is a financial solution better suited for situations where a large long-term investment is required and the necessary expenses can be predicted.
A business line of credit is a more suitable product for businesses that need more working capital. It helps to manage spikes in demand and cover unexpected costs in a more short-term capacity.
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