Unsecured loan for small businesses

Representatives of small businesses often apply to bank organizations for loans, as they need additional funds. They can get these funds by simply withdrawing them from circulation, but this is not profitable, as it will slow down the development of the enterprise and reduce revenue.

Since businesses require large amounts of loans, banking organizations, wishing to reinsure themselves, ask for some property as collateral. But not every representative of a small business has a valuable property that will be interesting to the lender or the business owner simply does not want to risk the existing property. And then the question arises, is it possible to conclude a loan deal without collateral?

Where to apply?

Representatives of small businesses are quite profitable borrowers who almost always return to the same bank for the next loan, that is, they become permanent borrowers. The best option is usually to contact the bank that provides financial services to the company. In this case, the borrower can get a deferred first payment, a favorable annual rate, and some other benefits that are sure to please. In any case, transactions of this kind carry a high risk for the lender, and therefore you should not expect to receive a large loan without collateral.

Features of transactions without collateral

Loans for business always begin with the filing of the loan application. If the borrower immediately says that they do not have property or do not want to use it as collateral, the specialists of the financial organization are more responsible for checking all the information that is specified in the loan application.

Since it is important for the lender to know that the funds will be returned to them along with the interest, they can ask the potential borrower for a plan, according to which the additional funds will lead to an increase in the company’s profit. With it, the borrower will make repayment of their debt, but even in this case, the borrowed amount will be small. Unsecured business loans are not suitable for expanding production, buying real estate and equipment, they are a good option only for purchasing raw materials or some goods.

Private investor

It is not always possible for small businesses to negotiate with a financial organization and have to solve the lack of financial resources in other ways. One of these methods is to appeal to a private investor. This type of loan has its own advantages. If the lender is a supplier, it can set a very small percentage, which will only be equal to the percentage of inflation. It can issue credit not only with money but also with products.

Such transactions are also attractive for the reason that the borrower will not need to collect a huge number of documents, as is necessary for standard bank lending. The agreement between such participants in a credit transaction is rarely signed, mainly the guarantee of repayment to the lender is a receipt drawn up by the owner of the business for which the loan is taken.