Working capital, refurbishment and asset finance are some of the most common reasons clients come to Enness Commercial requiring unsecured business loans.
Tom O’Brien (pictured), mortgage broker at Enness Commercial, in a Q&A on unsecured loans explains that unsecured loans are a beneficial option for a variety of different scenarios.
Deposit for a commercial mortgage, expansion and growth and refinancing an existing loan also all use unsecured loans due to the speed in which a loan can be obtained.
O’Brien highlights that providing a business can show profitable accounts for previous years or have good reason for short term losses can secure an unsecured business loan – even if the business has made a loss in the last year.
The Q&A below also discusses the importance of having a broker who has connections to decision makes at a lender when carrying out such a loan.
Q&A with Tom O’Brien, mortgage broker at Enness Commercial
What are the benefits of an unsecured business loan?
There are a number of benefits of an unsecured business loan; they can be completed within a week, so for businesses requiring finance quickly, it’s an ideal solution. They also don’t need to be secured against an asset. Often, companies are already highly leveraged against assets to finance business activities, so if they need more funds, an unsecured business loan can be a beneficial option. Also, some companies don’t own their own property or assets and therefore have nothing to secure finance against, this is an option for them. Many people may think that this form of finance would be expensive but, in many cases, it’s cheaper than another short-term finance option they may turn to.
How can a business qualify for one?
As long as a business has been running for two years and the company has one years’ full accounts they can qualify. If there are only one years’ accounts they would want to see year to date figures and cash flows as well. The business’ previous performance determines whether a lender will be happy to provide funds.
How much will a lender allow a business to borrow on an unsecured basis?
This will depend on the accounts and credit history of the company. Fully unsecured lending can go as high as £350,000, depending on the quality and prior performance of the business according the lender’s criteria. The average loan size we deal with is around £150,000.
How do lenders insure themselves if the loan is not secured against a particular asset?
A lender will take a company guarantee and personal guarantee from the director/s of the company; this is a signed document agreeing that the loan will be paid back. There is no specific security taken but there is an obligation for the loan to be paid back. The lender will only release the amount they believe a company’s turnover sufficiently covers.
Can you get an unsecured business loan if the business has made a loss in the last year?
Yes, providing a business can show profitable accounts for previous years, or they have a good reason for the short-term losses, they can secure an unsecured business loan.
How can Enness help?
Having a broker on your side who has a long standing relationship with the decision makers at a lender can make the process a lot more fruitful, and can also speed things along. We are trusted by lenders and can work with them to take a holistic view of your business’ circumstances. The way in which your case is presented can be the difference between a yes or no.