What is an unsecured business startup loan?
Some people start up a business even if they don’t have sufficient funding available for the continuous operation of the business. Part of their feasibility study or business plan could be acquiring startup loan to support the funding needs of the business. This shouldn’t be much of a problem because most banks and financing firms in Australia do provide this service to startup companies, especially if they find the business to be a good market niche that guarantees a stable revenue stream for the business owner.
Related article: Are You Ready To Start Your Business?
Often, business entrepreneurs applying for a business startup loan will be required to provide a form of security against the loan. This is a secured business startup loan where the lending party will accept anything of equivalent value or more to the loan amount as collateral for the borrowed money.
What happens if you are not able to provide any collateral or security for the business startup loan being applied for? Are you denied the opportunity to access to funds that can help grow your business?
Fortunately, there is another type of loan called unsecured business startup loan. This type of loan is approved or granted even without providing any collateral or security. In a business sense, this type of loan may be considered a cash advance against future income of the company. Without collateral, an unsecured loan poses a higher risk to the lending company and as such, a higher interest rate is imposed to compensate for the higher risk.
The loan is secured by the loan applicant’s signature and commitment to pay. This type of loan is preferred more by business owners as they are not pledging additional assets towards the loan. Unsecured loans are approved faster than other types of loan, especially if all the required documentation is in order.
To apply for an unsecured business startup loan, a typical process is described below:
- Consultation With a Financial Expert. Get all necessary information from a financial expert from the bank, lending firm or government agency
- Application Process Begins. Documents to be filled out and submitted
- Verification of Credentials. Lender will check and verify your background, credit status and history
- Approval and Signing. Loan is approved and loan contracts are signed. Funds are released soon after
As soon as the loan proceeds are released, the business owner can freely use the funds according to what was agreed upon with the bank or lender. This is to make sure that the use of funds will in turn result to generating revenue that will be used to pay out the loan obligations.