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If you’re a small business owner, chances are, you’re going to need to raise financing at some point to cover the cost of anything from new equipment and premises to inventory and marketing. In order to do this, most companies will need to apply for a loan — however, in order to secure it, the owner will most likely have to provide some form of collateral.
While this may be a common procedure, if you’re not keen on risking your real estate, portfolio investments, or other tangible assets as security, there are options — unsecured business loans. As the name suggests, these are no collateral loans, meaning that borrowers can rest assured their assets won’t be seized if things don’t go to plan.
Since they aren’t backed by collateral, unsecured loans rely heavily on the borrower’s creditworthiness and the company’s cash flow. Typically, small businesses apply for this type of loan when they don’t qualify for a traditional loan — for instance, they may not have much in the way of collateral.
That said, because no collateral is required, these tend to come with higher interest rates than traditional loans in order to account for the increased risk to the lender. Additionally, these loans tend to be offered as short-term solutions to further help offset the inherent risk.
However, if your business has a strong credit score and you can afford the higher interest payments, there are some very good reasons to apply for this type of funding. Aside from the obvious advantage of not needing to put up collateral, unsecured loans tend to be much quicker to arrange as they don’t require appraisals to be carried out, meaning that businesses can move quickly if they need to.
Although there are a number of lenders in the market, at AMP Advance, we like to make the process as quick and easy as possible. With our simple application form, you can be approved in a matter of days as opposed to weeks.
Like most lenders who provide unsecured loans, although we don’t require collateral, we do require a personal guarantee. These guarantees act as an assurance that in the event that should things go wrong, the loan will be repaid. Unlike collateral, which links a loan to a specific asset like a borrower’s home, and can be seized, a personal guarantee is simply an agreement that the loan will be repaid without tying it to any specific asset.
Ultimately, personal guarantees serve as a commitment to respect a loan agreement, indicating that the borrower is dependable and trustworthy.
The interest rates vary greatly both within the market and within individual lenders themselves. With no concrete rates, the main determining factor for the cost of a loan is the financial stability of a specific company. At AMP Advance, we look carefully at the company’s credit profile to determine their ability to reliably repay the loan and arrive at an interest rate that reflects this — and offer some of the best-unsecured business loans in the market.
For example, a business with a good credit score and high-profit margins will likely qualify for low-interest rates — on the other hand, should it have a poor credit rating or low profits, we may charge a higher rate to account for the increased risk incurred with the loan.
If you’d like to find out how much a loan will cost based on your credit rating, AMP Advance has a simple-to-use credit calculator that will give you a good idea.
As mentioned, with collateral not being part of the equation, the main qualifying factor when it comes to unsecured business loans is a good credit score. If you can show a history of reliable loan payments and a strong credit profile, this will help demonstrate your financial responsibility and make it much easier to get approval for a loan — and a cheaper one along with it.
When it comes to minimum requirements, at AMP Advance, we require our applicants to meet the following criteria:
To give you some idea of the kinds of companies we lend to, our average client has been active for over two years and has a FICO credit score of 630.
For businesses that are more seasonal in nature, we may require further supporting documentation such as:
If you’ve ever filed for bankruptcy, at AMP Advance, you can still qualify so long as all bankruptcies have been completely satisfied and discharged for a minimum of two years, and that all tax liens are on active payment plans.
The lengths of unsecured loans can vary greatly, once again depending on your credit score and performance. Although loans are available for 1-10 years, in general, these are short-term solutions. To find out more about how long your loan agreement could be, get in touch with AMP Advance — we’ll be more than happy to discuss your situation.
If you feel that your credit history may not meet our requirements, don’t worry. At AMP Advance, we work diligently with companies and individuals to help arrange their financing needs. In the event that an unsecured business loan isn’t right for you, we have many other funding options such as a merchant cash advance that can serve as the solution you need.
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