How can you make no security business loans work for you? Avoiding the misconceptions that lead to mistakes is a good start.
How much do you know about unsecured business loans?
It’s an important question because many business owners have misconceptions about this loan type. Good or bad, these misconceptions can lead to issues. For example, they could prevent you from exploring these loans as an option altogether.
That’s a mistake. Good no security business loans offer massive benefits to your business. One organisational analyst found that out for herself.
Tania is a Sydney-based organisational analyst with her own business. Her goal is to help others to streamline a range of processes in their businesses.
And she needed finance to help her create branding to that effect.
She decided to go with an unsecured loan to provide quick access to funds. Now, she has a growing business and has even started to build a team.
Tania achieved that success because she didn’t fall for the misconceptions about unsecured business loans. Here are four to watch out for.
Misconception #1 – They’re Only for the Desperate
There’s this strange idea that unsecured loans are only for business owners who can’t get finance elsewhere. They’re the last resort when every bank has said “no” to your application.
If that was the case, this wholesale meat vendor wouldn’t have used them.
Michael operates a wholesale meat business in Sydney. For decades, the business has enjoyed a healthy turnover.
They had the opportunity to take advantage of the holiday season to sell more product. And that meant they needed quick access to funds so they could bolster their inventory.
An unsecured loan offered them access to the funds they needed. This allowed them to give their revenue a great boost during the holiday season.
This misconception seems to stem from the faster application process for unsecured loans. Where banks may take several weeks to approve other loans, you can get an unsecured loan in a matter of days.
But this doesn’t mean they’re for the desperate. In Michael’s case, the loan offered access to funds to give his already healthy business a timely boost.
It’s also important to note that every lender conducts checks on clients before approving a loan. This goes for those offering no security business loans too. This means that vendors lend only to those who prove themselves capable of repaying the loan.
Misconception #2 – You Have no Liability
The use of the term “unsecured” may lead you to think that you have no liability for the loan. After all, you’re offering no security on the loan. That seems to indicate that you won’t face any issues if you fail to make repayments.
This isn’t the case.
Even though you don’t offer a business asset as security on the loan, you’re still liable for making repayments.
For example, some lenders ask you to offer a personal guarantee as part of the application process. This means you put your personal assets and credit score on the line when applying for the loan.
If the business fails, the lender may look to reclaim what you owe through your personal assets.
Furthermore, your lender still has the ability to recoup their losses in whatever way they can. This may result in legal action or it could lead to them making claims on business assets.
The key here is to recognise that you still have a responsibility with this type of loan. Ensure you’re able to service it before applying.
Misconception #3 – Unsecured Business Loans = Payday Loans
This is another misconception that seems to arise from the idea that no security business loans are for the desperate.
People hear horror stories about payday loans. They also hear that payday loans offer fast access to finance.
They then hear that unsecured loans offer similar speed in terms of access. And they automatically assume that must mean they’re a form of payday loan.
No security business loans help business owners to deal with all sorts of issues. Some of these may relate to cash flow. Others may relate to taking advantage of limited-time opportunities, as was the case with Michael above.
They also have more defined criteria. For example, you need to have an Australian Business Number (ABN) to apply for an unsecured business loan. That’s not a requirement for payday loans.
They’re a legitimate type of business loan that serves a valuable purpose to business owners. They also offer reasonable loan fees and interest rates.
Misconception #4 – They’re Only for Small Businesses
Some believe that unsecured business loans are only suitable for small businesses. They argue that you can only access small sums of money with this loan type. As a result, larger businesses still have to go to the bank.
Again, this is not the case.
Many unsecured loan providers offer access to substantial funds. For example, Unsecured Finance Australia offers loans ranging from $5,000 to $300,000. This means that larger businesses can make use of these loans to gain quick access to funds.
As with other business loan types, the funds you can access depend on the financial health of the company. A large and healthy business will usually be able to access appropriate funding to help with a range of issues.
Don’t Fall for the Myths and Misconceptions
There’s a worrying thing about these misconceptions. They can prevent business owners from applying for an unsecured loan.
And that means you’re missing out on an opportunity. With an unsecured loan, you eliminate much of the red tape. That means you get quicker access to funds, which allows you to take advantage of business opportunities.
They’re not for desperate business owners and they aren’t the same thing as payday loans. Unsecured loans have their own sets of checks and criteria. Plus, they’re available for healthy businesses of all sizes.
At Unsecured Finance Australia, we can offer you access to these types of loans. Head to our website to find out more about what we have to offer. And if you’re ready to apply, use our online form to lodge your application in less than five minutes.