What You Should Know About Business Loans Without PledgeUncategorized
Like many small business owners, you may sometimes need to cover short-term expenses such as higher tax assessments, various repairs, the purchase of important equipment, or medium- to long-term investments such as rebuilding, expanding, investing in stocks or recruiting.
If you’re just getting started, visiting a bank may not be a good choice. Even if you meet the minimum credit requirements, such as minimum operating time and annual turnover, a business loan from a bank may be subject to collateral.
Most people know how secured business loans work because they have already encountered this type of borrowing in their personal lives. The best-known secured loan is, for example, a mortgage where the home you are buying is collateral. If you do not repay the mortgage, the lender will be able to take your property away. The principle of secured loans is therefore to minimize the risk to the lender. It is for this reason that many banks only provide this type of loan, especially to young and small businesses, which are naturally at risk.
Most banks require liquid assets, ie assets that can easily be converted into cash if assets are seized. The easier it is to transfer the collateral to cash, the higher the chance of obtaining a business loan from a bank. The most common pledges accepted by banks today include commercial real estate, business equipment, inventory and inventory.
Most people think that borrowing from a bank is the cheapest way to get a business loan. But it can be quite difficult to reach a business loan with a bank, and it can take several months before you get a clear statement. The collateral required for this type of loan can also be audited, which means extra time and more burden for your small business.
How to get a loan for a small business without collateral
Although secured business loans obtained after the collateral generally have better conditions than unsecured business loans, there are a number of unsecured non-collateralised business loans with similar terms and conditions. In addition to the time saved during the application and approval process, the speed of processing is a big plus. Access finance when you need it.
This is the main reason why more and more small business owners are looking for alternatives such as silent factoring or business loans provided by private lenders or financial technology companies. Factoring is a great choice to finance sales invoices and maintain a strong and successful business.
In addition, some of these alternatives rely mostly on a personal guarantee in addition to a straightforward application process, quick response and fast payout. This means that if you receive a loan with a personal guarantee instead of a secured loan, you provide a guarantee that if your company is unable to repay the loan, you will repay it as a natural person.
A personal guarantee should not scare you, but it is important to understand how it works
It is important to understand that a personal guarantee does not require any fixed assets such as a flat or family valuables. Usually you have to prove that you have some funds to repay the loan in case the company is unable to repay. Nobody takes a business loan for not paying it back, but the reality is that not all businesses succeed and not all debts are repaid. Therefore, most private lenders who provide unsecured business loans require personal guarantees.
Another aspect to consider is that you also need to meet certain credit score criteria in order for your personal guarantee to be approved. Some private lenders and financial technology companies may request a list of all your assets and liabilities (even if there are not many) during the application process.
Ferratum Business offers unsecured business loans that require only a personal guarantee. The request via the Internet will only take a few minutes and you will receive an answer the same day. Any Czech entrepreneur doing business for at least 12 months and owning a business bank account with a repayment period of between 6 and 18 months can obtain funding.
How to get a business loan without collateral
When you take a business loan to finance a small business, you should always have a plan on how to repay the loan. Always ask yourself why you want to take the loan?
Whenever you are looking for business finance, you should think about what is most important to you and your business at the moment. Loan costs always play a role, but getting a new client, purchasing equipment to help a business grow, investing in marketing, or hiring new employees can be a smarter investment for your business than waiting for the lowest interest rate on the market. The choice is yours.
Read the loan terms and conditions carefully
Before taking any credit, we recommend that you take an objective look at your business and finance. Consider to what extent it is possible that, despite the best efforts and best intentions, the business plan might not work out. Review all possible scenarios of how each installment could affect your business and your personal finances.