Capital deficiency and financial setbacks are common obstacles on the road to success and growth for small businesses. While the banks might reject the loan applications citing reasons such as lack of management and a substantial turnover, a small business owner has lots to benefit from by getting unsecured business loans through a finance broker in Australia.
Unlike standard and secured business loans, unsecured loans do not require a security against the dispensed amount. That stands to be the biggest advantage, considering many businesses turn up empty-handed when asked for collateral. But is that all? What are the other advantages of applying for an unsecured loan? Read below to know more.
Let’s start by understanding what entails an unsecured small business loan.
What is an Unsecured Business Loan?
An unsecured business loan enables a business to acquire funding without putting assets as collateral or security. The lender would assess the credit score, cash flow statements, and financial documents along with other factors to approve and dispense the loan amount, after the borrower agrees to the loan approval terms.
Benefits of Getting an Unsecured Small Business Loan
Small or new businesses with limited financial resources or assets can benefit significantly from unsecured loans.
- Zero requirements for asset valuation in the form of collateral.
- Reduces the approval time facilitating easy and fast access to funds.
- Requires minimal documentation (An ID proof and bank statements from the last 6 months) as against standard business loans.
- Zero risk of losing an asset in the form of collateral.
- Replenishes and fills the financial gap in the business, accelerating growth.
The timely repayment of the small business loan solidifies the overall credit score of the business. It enables the owner to secure future loans at lower interest rates.
Can a Loan Application for an Unsecured Loan get Rejected?
A business’ application for an unsecured loan can get rejected under the following circumstances:
- A poor credit score of the business
- Short or no trading history
- Pre-existing debts in the market
- Inconsistencies in monthly/annual turnover
- If the industry is going through a down phase and investment becomes a risk
While there are instances of the loan application getting rejected due to the above-mentioned conditions, some lenders are even ready to ignore such discrepancies, based on the scrutiny of the financial documents submitted by the borrower.
Small businesses might often encounter a situation where they require urgent cash flow for business growth, inventory management, project completion, etc. An unsecured loan presents the opportunity to acquire fast funding without much hassle, provided there is a private lender to consider all those factors and approve the loan quickly.
It is not an easy task to get in touch with a private lender ready to offer a flexible small business loan product. That’s why businesses should seek help from a finance broker in Australia.
These financial entities have a robust network of credible private lenders, gaining them access to a wide variety of loan products, unlike a single private lender. Collaborating with a finance broker minimizes the risk and enables businesses to choose unsecured business loans that fit their financial criteria.