How do unsecured business loans differ from regular business loans?

A recent study showed that 53% of all invoices across Australia were paid late. This is a major problem, particularly for small businesses. A business loan can be the ideal solution to help small businesses bridge the gap. However, traditional bank loans can take weeks to be approved, depending on your credit score, business history etc. The solution: unsecured small business loans.

What is an unsecured small business loan?

To reduce risk, banks prefer to provide secured loans or loans against security. If collateral isn’t available, the interest rate on the loan is increased which can affect cash flow for small business owners. An unsecured small business loan does not require collateral and has a shorter term of up to 5 years. However, there are other lender-specific requirements you need to meet with respect to income, credit score etc. Traditional lenders are generally risk-averse and give a lot of weightage of credit scores. However, a number of small bank lenders offer unsecured small business loans to cater to the needs of small businesses and applicants with poor credit. So, if you have a low credit score, the odds of getting funded are much better with non-bank lenders.

Eligibility requirements

The minimum eligibility requirements are more or less standard across all Australian lenders. You should have been trading for at least 6 months and have a stable monthly turnover of at least $5000. You should also have a good credit score. When applying with a non-bank lender, this information is usually all that’s required to set the application process into motion.

How do unsecured business loans differ from regular business loans?

Unsecured business loans come with shorter repayment periods and the loan amounts are generally smaller. However, this can vary widely from lender to lender. Compared to traditional business loans, you are more likely to get flexible repayments such as weekly, bi-weekly or monthly. However, the rate of interest is higher given the risk factor. That said, you can still save a considerable amount by comparing different providers the fees they charge - establishment fee, prepayment fee, administration fee, etc - and choose the most reasonable one.

How long does the application process take?

If you need funds immediately, an unsecured small business loan from a non-bank lender is your best bet. Filling out the online application form takes just a few minutes and you can expect to hear back within 24 hours.

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