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                        Unsecured / Secured Business loans

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What is an unsecured business loan?

An unsecured business loan is a type of business loan which is borrowed by businesses for a variety of purposes, such as investment. An unsecured business loan means that a business can borrow finance with a lowered risk of losing business or personal assets.

The loan is typically repaid once all monthly repayments are repaid, including any interest that has been accrued during the process. You may be asked to sign a personal guarantee when applying for an unsecured business loan.

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How does an unsecured business loan work?

When a business owner applies for an unsecured business loan, they will be required to decide how much they need to borrow and how long they will need to fully repay the loan and accrued interest.

As the loan is unsecured, the owner will not be required to use a business asset as a form of security, should they fail to repay the loan. This removes the risk of a business losing or forfeiting an asset.

The owner will be expected to sign a personal guarantee. This would mean that the owner is personally liable to cover any of the loan which remains unpaid should the business fail to repay the loan.

Will I have to sign a personal guarantee with an unsecured loan?

Yes, it is typically expected that a business owner is required to sign a personal guarantee (PG) when applying for an unsecured loan. The facility still remains unsecured, but a personal guarantee promises that if the business fails, the director(s) will be personally responsible for the outstanding debt.

From experience, most borrowers who are confident in their business will sign a personal guarantee without issue. For business owners who are concerned about signing a personal guarantee, we are able to provide personal guarantee insurance cover, which will settle the debt rather than the personal guarantee being enforced.

There are some exemptions for requiring a personal guarantee, such as government-backed schemes and some short-term loans for VAT and Tax purposes.

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How much can I borrow with an unsecured loan?

Currently, the maximum single advance is £50,000. However, we have as much as £150,000 exposure from different customers who have built a strong repayment track record with us. 

The amount you can borrow will largely relate to your past business performance and/or anticipated future business performance. So this may affect how much you may be able to borrow when you apply for a loan.

Who can apply for a business loan?

Any business can apply for a business loan as long as they meet the minimum eligibility criteria. At JPM Capital, our unsecured business loans can help sole traders, small businesses and medium businesses to help invest and grow.

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How much interest is charged on a business loan with Finserv capital ?

Typically, JPM customers pay 2 – 2.5% interest per month, on terms from 3 to 36 months. Our loans are built on speed, service and commercial underwriting – meaning we will consider applications from customers who may have been declined elsewhere. 

On this basis we do assume more risk than the average lender, so that risk is built into our pricing structure. Although 2 – 2.5% per month is still a very competitive option in the market.

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What is the difference between a secured and unsecured business loan?

When a business owner applies for a secured business loan, they are required to provide security in the form of an asset. This means that should the owner fail to repay the amount that is borrowed, they will have to forfeit said asset to the lender. The asset that is provided can either be a personal or business asset, such as property, machinery, or anything that is deemed valuable.

An unsecured loan does not require the owner to provide any security when they apply for a business loan. This means that should the owner default on their loan, they will not run the risk of losing property or an asset.

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What are the positives and drawbacks of an unsecured business loan?

Advantages

Less risk of losing assets: With an unsecured loan, you are not obligated to attach an asset to the loan. This means that the risk of losing personal or business assets decreases.

Faster application process: As a secured loan requires an asset as security, this can often delay the application process whilst the asset is assessed and valued to ensure the security meets the lender’s standards. An unsecured loan does not require security, so the application process can be done quickly.

Reduced upfront costs: A secured loan may cost more money due to the lender having to review and assess assets. As an unsecured loan does not require assets, this can sometimes reduce the upfront cost of the loan.

Disadvantages

Higher rates of interest: As an unsecured loan provides less security for the lender, it means that unsecured loans typically come with a higher rate of interest.

Smaller loan amounts: Unsecured business loans may loan in smaller amounts than a business may need, due to the risks that are posed to the lender should the loan not be repaid. This may only affect businesses that are looking for a large amount of cash to borrow.

Requires a reputable business credit score: When reviewing the loan application the lender will likely take the credit score of the business into account. This will provide an insight to the lender whether the client they are assessing is reliable and likely to repay the loan. Therefore, a poor credit score could affect the chances of being accepted for a loan.

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Why do businesses apply for unsecured business loans?

Investment

Unsecured business loans are typically used to help a business invest in areas that could help the business improve. The loan can help businesses make the necessary improvements it needs without damaging its cash flow or cash reserves.

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Do not require security

Some business owners are very cautious about losing an asset, especially if the asset is vital to the running of their business. Instead, a business owner may prefer paying the higher rates of interest for this reason.

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Spread costs

An unsecured business loan may be used by a business to help spread the cost of a purchase. This means that the business can use the loan to make a purchase outright, then spread the cost over a period of months.

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How can I apply for a business loan with Finserv- capital?

To apply for a business loan with JPM Capital you can either click the ‘Apply Now’ button which will take you to a form to complete. Alternatively, you can apply for a loan by calling us and speaking to one of our account managers directly.

Applying online: Once you have submitted your contact form, one of our account managers will soon be in touch to discuss your application.

Apply over the phone: If you wish to apply over the phone and speak to one of our account managers directly, please ring 0345 548 0036

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What information do I need to provide when applying for a loan?

When applying for a loan you may be asked to provide some basic information that will be used to assess your application. These documents vary but generally, our account managers will ask for the following:

• Copy of Latest Accounts

• 3 months recent bank statements

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Am I eligible for a business loan?

In order to be eligible for business funding you must meet the following criteria:

• Be an existing UK based business

• Have no active County Court Judgements

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