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For many businesses, cash flow can become tied up for a variety of reasons. Late payment of invoices, supply chain issues, or seasonal lulls in business activities. No matter the reason, an otherwise thriving business can grind to a halt without some kind of bridging finance. But luckily there is a variety of business loan options. 

Emergency bridging finance or unsecured business loans can help – with bad credit being approved within 24 hours for most business customers.

Amongst the variety of business loan options to choose from, unsecured business loans make a favourable option as they are quicker, easier, and make convenient ways of putting together working capital in a short amount of time. 

This article explains what an unsecured business loan is, why it’s faster than asking your bank, and what you can use the unsecured loan for.

What is an unsecured business loan?

An unsecured business loan is a type of loan that doesn’t require collateral or what’s known in finance as a “security” to back up the loan. That means you don’t have to purchase an asset, such as a car or a piece of equipment, in order for the loan to be approved. 

An unsecured business loan is also a type of emergency loan that can cover unexpected expenses, business cash flow interruptions, or help you seize upon short-term opportunities that your working capital or usual lines of credit can’t readily cover.

Why not just ask my bank for this business loan

You can – only if you’re prepared to hurry up and wait.

Unsecured business finance may come from a panel of non-conforming or private unsecured business loan lender well versed in cash flow lending. They usually don’t require much documentation (known as no or low doc lending) and have the flexibility to have the cash in your business bank account in as little as 24 hours – sometimes even faster. 

Your bank may ask for documents and other evidence as to why you need the business loan – and refuse extending more credit to your business even if you have jumped through all their compliance hoops. 

What can I use an unsecured loan for?

Businesses may use an unsecured business loan for a variety of reasons. Here are some of the more common applications for an unsecured business loan:

Cash flow shortfall

Sometimes, debtors’ invoices go unpaid and can put a real strain on operating capital. An unsecured business loan can cover urgent and important short-term expenses relating to bills, payroll, or creditors.

Bridging finance

In between waiting for a major lender to clear funds on a property and the sale of an old property – or perhaps you are waiting for council approval – you may need to keep cash flow up until the unsecured business loan lender comes through with the funds or the sale of the older property is complete.

Tax debt loans

Sudden tax debts may arise that need immediate attention. An unsecured business loan can cover these debts until more cash comes in.

Unexpected expenses

Owning a business is full of surprises – you may need to cover equipment failures that your business is reliant upon. An unsecured business loan can cover repairs or replacements in a short amount of time.

Short-term finance

A commercial bridging loan may help you pay suppliers with shorter payment terms than your usual sales cycle. This can help you manage such debts and pay them on time while waiting for sales income.

Start-up business loans

Some start-ups may be denied finance as they have not been operating for long enough to satisfy lender requirements. Unsecured business finance can help start-ups raise much needed capital to begin their operations.

How much can I apply for? – A case study

Some lenders are simply too slow for the fast-paced nature of business.

One of our valued customers, A Corp (name withheld for privacy reasons) was already approved for multiple lines of equipment finance and working capital finance. Even so, they had urgent expenses they needed to cover, and couldn’t wait weeks upon weeks until their large business bank settled the funds.

They came to us and literally said, “we need $200,000 now, or we’re bust!”

Although they had securities (collateral) tied up with other lenders, we could source a lender that assessed, approved, and funded amounts up to $2 million on the same day loan, which was allowed because of this business loan rate criteria. 

In addition, we also negotiated an early payout discount for when the other lender’s funds eventually cleared.

Of course, the amount a business can borrow depends on how long the business has been operating, their annual turnover, and their line of credit history.

What you need to know about unsecured business loans

As these loans are unsecured, you will have to take into consideration these business loans interest rates as they are higher than the usual interest rate compared with a secured business loan at the same amount and loan term.

Some unsecured business loans may have shorter loan terms – which is convenient if you only need the loan to bridge the gap between bigger loans or accounts receivable – but other smaller new businesses may struggle to keep up.

How to apply for emergency bridging finance

If you need emergency bridging finance or an unsecured business loan, can help. Talk to us about our cash flow lending solutions by sending us a quick enquiry here

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