"Unsecured business finance should always be considered as one of many options within any adviser’s toolkit"
The last few years have proven to be rather challenging for both businesses and households across the UK, with the cost-of-living crisis putting the squeeze on finances and forcing many people to reassess their spending and borrowing needs.
For many self-employed and smaller business owners in particular, scalability and turning a profit has been especially challenging with rising costs and supply chain issues only serving to augment these problems even further.
As we start the new year however, the economic outlook appears somewhat brighter. The Bank of England base rate has remained steady since August and although inflation rose to 4.2% in December according to ONS, many self-employed businesses are starting to look ahead to the next 12 months as they begin to seek ways to lay the foundations for future growth.
Against this backdrop, some of these firms may begin to explore new ways in which to gain access to swift, uncomplex and flexible borrowing that can enable them to finance their business objectives. This could include accessing funds to make new stock purchases, investing in future growth plans, or simply to provide a buffer to smooth fluctuations in cash flow.
Whatever the reason, an unsecured business loan may prove an effective way of helping a client achieve their goals by offering them a way to borrow money without having to put down an asset such as land, property or equipment as a security.
This can prove an attractive option for any self-employed individuals or those smaller firms that do not have enough, or do not want to use, assets as collateral to secure a loan. It also means the application process is quicker and easier compared to other types of borrowing as there are no physical assets to evaluate and the capital can be accessed sooner.
As with any type of finance application, all firms applying for unsecured business finance will have their business credit score and personal creditworthiness assessed by the lender in order to determine their level of risk as a borrower.
In most cases, lenders will also check the company’s finances to ensure they can keep up with repayments, which means applicants will need to supply copies of personal and business bank statements as well as details of any outstanding business loans and tax returns.
Many lenders also require borrowers to sign a personal guarantee, also known as a director’s guarantee, which is a legal agreement stating that the loan will be repaid using the personal funds of the individual borrower if the business fails to make repayments. In some cases, the borrower’s partner or spouse may also be required to sign the guarantee.
For brokers with self-employed clients looking for quick access to funds, unsecured business finance should always be considered as one of many options within any adviser’s toolkit as it can offer a quick and easy solution to addressing the needs of their client as well as provide the broker with an opportunity to diversify their income stream.
Contacting a specialist distributor such as Norton Broker Services to outline their client’s requirements can help those brokers unfamiliar with this area of borrowing address the needs of their clients by getting a better understanding of the options available and help their clients find a solution to achieving their business objectives.