Can I grow my business startup with unsecured business loans?

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Money makes the world go round and without it, you won’t be getting your business startup off the ground. The economy might be growing, but getting banks to lend to business startups is still frustratingly difficult. It has spawned a rise in alternative finance and increased peer-to-peer lending, invoice finance, business angel funding, crowdfunding and even unsecured business loans are becoming key to help launch new businesses.

If you are a small company, the chances are you’ll have tried to get a traditional bank loan. Unfortunately the banks have been reducing the amount they lend consistently over the last few years because, despite what they say, they remain risk-averse.

It means there are less avenues available for funding your startup. The biggest problem startups have when seeking funding is the lack of sufficient, audited accounts. One or two years is difficult, two or three years worth is out of the question. So alternative funding options have become an increasingly popular method of financing.

Alternative funding options for startups
You have probably already exhausted other avenues of funding, but it’s worth examining the options:

Peer-to-peer lending – has its advantages because you advertise your company’s business and loan proposition on websites like and wait for investment to come. It can, however, take a while for an investor to understand your business potential and sometimes it doesn’t arrive at all. If you can’t afford to wait around forever, amending and adding to your pitch, you’ll need something else.

Invoice finance – offers a great stepping stone to accessing ready-to-buy big clients meaning you won’t have to wait until you get paid in order to buy more stock or pay your way (staff, premises, stock etc.). But when you don’t have any big-paying clients on board yet, you still need to make, market and buy stock.

Pension scheme – utilising your pension, either through a SIPP or a SAAS can offer a way to loan ready cash to benefit your startup, although be prepared to meet strict repayment and qualifying criteria. This can be great option for a business owner in their 40s or 50s, but for the twenty/thirty-somethings, whose pensions aren’t big enough yet, it isn’t an option.

Crowdfunding – like peer-to-peer funding this involves a lot of detailed projections and creative pitching, but moreover, a lot of waiting time that new startups don’t have. If you can offer significant rewards-based or equity returns for potential investors, it can be a highly beneficial method of finance. Be prepared for revealing your key financial details online to (potentially) hundreds of investors – if you are lucky.

Grants – there are many which you may be eligible for, ranging from small local authority opportunities to bigger regional development funds. They will probably not be able to fund all the costs of your start up and can often involve substantial amounts of form-filling; but they are free after all.

Family – ok, you’ve already been there…

How unsecured business loans can fund your business startup
Raising finance externally can be a liberating launch pad when considering your business growth. If putting up any of your business or personal assets as security sounds scary then you are in good company because many startups turn to shorter term, larger sum funding in the form of unsecured business loans.

As opposed to secured loans, which can be tougher to access and require a greater amount of time taken to approve them, if you have a reasonable credit score you may be able to access an unsecured loan, offering greater flexibility than either secured loans, or the above forms of alternative finance, and leaving you in full control of how to use your loan.

When you have a startup, you need funding straightway and few finance methods work as well an unsecured loan; they don’t involve using any assets or securities against the loan, either personal or business.

The downside to these benefits is that interest rates might be higher, a small price to pay for flexibility, and the freedom of having a large amount of capital at your fingertips.

Benefits of an unsecured loan

  • No risk to your assets
  • Quick and easy to arrange

Downside to an unsecured loan

  • Interest rates are higher
  • More expensive than a secured loan

The main benefit of choosing to fund your startup through an unsecured business loan is that they are commonly sought with just your credit score and your signature (as well as the usual business forms).

For first-time business owners, without any assets to offer, having access to money, quickly, without having to wait around forever, before being told the answer is ‘no’, makes unsecured business loans so attractive.

What an unsecured loan can do is offer you credit at a time when you most need it, usually when the viability of your business is on the line in some way.  To learn more about our finance packages call us today on 03330 069 141 or request a call back via our contact page.

Always explore your funding options carefully and consult your financial advisor when considering a loan.