How to get an unsecured business loan.

'When businesses need additional funds to either get started or expand, they will typically look at their different loan options. Most business loans fall into one of two categories — secured or unsecured.

A secured loan is a form of finance backed by collateral. For most businesses, the collateral takes the form of real estate, either commercial or residential.

As its name suggests, unsecured loans have no assets to back them and are financed based on the ability of the business to repay the loan.The good news for new businesses, or businesses without suitable assets to back a loan, is that it is possible to get finance.

Understandably, an unsecured loan is deemed riskier by the lender. You would expect to pay a higher rate of interest and potentially fees to get the loan facility established. Lenders will make financing decisions based on the business’ stability and the ability to repay the loan. This will factor in things like credit history, credit score and the business' cash flow.

There are options for unsecured finance that businesses can consider if they don’t have the ability to put up any collateral.

Business credit cards

Using business credit cards is normally not recommended as a form of financing, as they typically attract very high interest rates.

Business lines of credit and overdrafts

Business lines of credit and overdrafts are both a form of revolving credit. That means that they are flexible and you can repay the funds and draw down as required for the business’ operation.