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When should a small business consider an unsecured business loan?

Unsecured business loans are easier to get and require no collateral. However, interest rates are higher for unsecured business loans. Why and when should you consider applying for one?

Top voted answer
Ian Harris

Ian Harris, Partner at B+I Lockwood Accountants

Top 10% Tax

There are a number of occasions when an unsecured business loan should be considered.

  • As a means of bolstering working capital eg you need to pay for some stock or continue to fund the operation whilst you collect some slow debtors
  • As a means to acquire a critical asset for the development of the business eg a piece of IT equipment which will allow to to lift capacity
  • To restructure your cashflow eg you've maxed out your credit cards and refinancing these with an unsecured loan would signiificantly reduce your regular outgoings
Many small businesses use unsecured loans to get themselves established while they build their sales beyond their break-even point.


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