Best Unsecured Business Loans

Business loans account for around 8% of UK SMEs' total funding. For those willing to take on debt, the choice between a secured and an unsecured company loan is a significant one.

With secured loans, you can use your property and other valuables to get it. This kind of borrowing is known as “asset-based lending”, and it allows lenders to seize collateral in the event of loan default.

However, no collateral is required to get an unsecured loan. Financial indicators such as cash flow, balance sheet, and cash reserves are more important to lenders than your personal credit history.

In the event of a company insolvency, an unsecured debt may often be discharged (forgiven). However, the majority of loan providers will want a guarantor.

After deciding that an unsecured loan is what you need, it's time to look at your other financing possibilities. To compile this list, we scoured the market for the finest unsecured choices, including those offered by traditional UK banks, non-traditional lenders, and peer-to-peer platforms.

At a Glance, Pros and Cons

This section summarises the pros and cons of top unsecured business loans.

Some small company owners may be daunted by the idea of using a valuable piece of property as collateral for a loan. Debt should not be taken on lightly. But there is a wide variety of unsecured business loan choices available, each with conditions that may be tailored to the needs of a certain company.

Here, however, are some potential downsides and benefits to think about. 

Pros

✔️ No collateral — The primary benefit of an unsecured loan is that it does not require you to put your business or personal assets at risk. If the company defaults on the debt, the lender will have no legal right to seize its assets.

✔️ No seizures — The lender of an unsecured business loan has no legal right to seize any of your company's assets in the event of a default. In other words, you don't need the lender's OK before you liquidate your assets and replace them. 

✔️ Low origination fees — Costs connected with an asset valuation are usually borne by the borrower of a secured business loan. Without this, the origination fees for an unsecured company loan may be cheaper, but the interest rates may be higher (as we will discuss below under “cons”).  

✔️ Reduce the time it takes to apply — The time it takes to acquire financing when you put up collateral might be significantly increased by the complexity and length of the appraisal procedure. Unsecured lenders won't care about your assets as much as your credit score, monthly revenue, and track record of making payments. In certain instances, firms might get their funding within a day of applying. If you need money immediately, that kind of quickness may be vital. 

✔️  Extensive selection of service providers and goods — There is a wide variety of options for unsecured company loans on the market today. There are a variety of financing options available beyond just term loans with fixed monthly payments. 

Cons

❌️ Higher interest rates — There is a higher interest rate associated with unsecured business loans. This is because, once again, the lender assumes a greater degree of risk with unsecured financing. Unsecured loans have higher interest rates than secured ones. A rise in borrowing costs will have a deleterious effect on a company's bottom line and may worsen existing financial problems.

❌️ Reduced loan amounts — You may not be able to borrow as much with an unsecured loan as you might with a secured loan due to the increased risk involved with unsecured financing. Lenders are more willing to provide credit in exchange for collateral since it reduces their risk. Short-term financing needs may be best served by unsecured loans. It's possible you won't get approved for the sum necessary to pay for that expansion, buy that costly piece of equipment, or make that massive inventory order. 

❌️ Harder to get — Valuation expenses and legal fees, if the lender levies a legal charge on your property, will likely be required upfront. Your loan application might be denied or its size reduced based on the results of the appraisal; nevertheless, you will still be responsible for paying the valuation charge.

❌️ The value of a good credit score — If you have a low credit score, your application for an unsecured business loan may be denied. The value of your credit score increases in the absence of collateral. You may still be able to get a loan, but the interest rate will likely be higher. 

Top unsecured business loans — Reviews

Unsecured loans ranging from a few thousand to several million pounds are available from the aforementioned lenders and brokers. If you're looking for an unsecured loan, keep reading. 

Without further ado, let's get down to the nitty-gritty of the best unsecured business loans. Verify if the service you want to utilise is covered by the FSCS. 

1. Metro Bank — Top-rated unsecured business loans

When it opened its doors in 2010, Metro Bank became the first new high street bank in the United Kingdom in more than 150 years. 

They have revolutionised the high street by keeping their stores up late and having a hip internet presence. Metro's website terms and conditions indicate that the bank provides safe unsecured business loans on a “subject to status” basis. Only by applying will you learn whether your company meets the requirements.

Submit your application to the branch. Customers with a Metro Bank Business Current Account are eligible, and a minimum monthly transaction volume applies. No payments are required under £25k. Valuation costs, legal expenses, and/or administrative fees may be incurred if the amount in question is above £25,000.

Visit Metro Bank

For loans up to £25,000, the standard interest rate range is between 9.6% fixed APR and 15% variable APR. In most cases, a minimum annual revenue of £2 million is required, however, exceptions may be made.

Up to £25,000 is readily available, with higher sums considered on an individual basis. Leases between 1 and 5 years are on the table. There is, however, another approach. Metro Bank offers unsecured loans to qualified businesses with the help of the British Business Bank and its Enterprise Finance Guarantee programme.

Businesses with annual sales of less than £41 million who do not have collateral to receive a traditional loan but have a solid business plan may qualify for this programme.

Metro Bank will walk you through the application procedure, but be aware that the Enterprise Finance Guarantee requires a 2% annual charge on all loans.

2. Barclays — Popular unsecured business loan for businesses

Established in 1690, Barclays has grown to become a global financial powerhouse.

Barclays has locations in many UK high streets, and the bank has lately pledged to maintain its ‘Last in town' locations, making it possible to do business at a physical location in all but the most distant places.

Visit Barclays

Send in your application or submit it in person, over the phone, or online. Any individual, group of individuals, corporation, charity, club, or organisation may make use of this service. If you need a loan of less than £100,000, you can get an online quotation in a matter of minutes. After that, you should have a final decision “within a few days”, and funding in your account within the next 48 hours.

The average annual percentage rate (APR) for a loan of this kind is 8.9%. Amounts from £1k-£25k are generally available, with a maximum of £100,000 for clients of Barclays Business Banking.

Contract lengths range from one to ten years. Barclays has one of the most open and accessible offers for loans between £1,000 and £25,000 thanks to their user-friendly unsecured business loan calculator on their website. Your estimated interest rate and monthly instalments are shown immediately.

Larger loans for company owners, up to £100,000, need an established connection with Barclays. Because the bank has to evaluate the stability of your company before deciding on a temporary lending limit for larger loans. If you fit this description, you may get a loan for up to the maximum amount allowed by the temporary lending limit and have the money in as short as 24 hours.

Barclays is a good option since they give a grace period of six months when you first take out a loan. Although interest will accumulate during this period, you will have some opportunity to put the borrowed funds to good use.

Due to the low, set interest rate and emphasis on long-term relationships with company clients, we consider this to be one of the finest deals for unsecured small business loans on the high street.

3. TSB — Top unsecured SME business loans

The latest iteration of TSB first appeared in 2013, making it a relative newcomer to the world of high street banks. 

With its lengthy association with the Lloyds Banking Group, however, TSB has become a household brand. Since its acquisition by the Spanish bank Sabadell in March 2015, TSB has expanded to more than 550 locations throughout the United Kingdom.

Send in your application or submit it in person, over the phone, or online. Only companies headquartered in the United Kingdom need to apply. The time taken to make a choice is unknown.

Visit TSB

However, after approval, the money should be in your account within two business days. Loans up to £15,000 are subject to an arrangement charge ranging from £100 to £250. Over this amount, there will be a 1.5% fee (minimum £250).

Interest rates are typically about 9.9% APR. The range of loans is from £1,000 to £25,000. TSB offers two types of business loans: a base rate loan with a variable interest rate and a fixed loan with a fixed interest rate, with durations ranging from one year to ten years. Secured and unsecured versions of each are on the table.

TBS's criteria for business loans claim that although they provide a wide spread for secured loans, they only lend between £1,000 and £25,000 for unsecured loans. However, among the companies evaluated here, their 10-year contract is among the most lucrative.

Independent service quality surveys have shown that just 38% of small and medium-sized enterprises are prepared to refer TSB to other SMEs, making them the lowest-rated business bank. Even more disconcerting, just 37% of customers said they were satisfied with TSB's account management.

It's not all bad news, however; TSB is making an effort to win back the trust of small and medium-sized enterprises. TSB recently published a report in which they stated their intention to assist local companies by spending large sums of money and outlining strategies to enhance their ties with its SME clientele.

4. Fleximize — Well-reviewed UK unsecured loans for businesses

Established in October 2013, Fleximize takes great satisfaction in its ability to provide quick and versatile financing in as little as 48 hours.

The loan duration may be shortened by making prepayments without penalty, and more funds can be added to the loan at any time.

Fleximize encourages firms who have been denied elsewhere to apply directly for this financing method since the lending requirements here may be different from those of a typical bank.

Visit Fleximize

Send your application in over the internet or by phone. But, UK limited companies and LLPs, you can't apply till you've been in business for at least six months. Guernsey, Jersey, and the Isle of Man are not included. A decision will be made within 24 to 48 hours. When you apply in person, there are no costs involved.

A monthly interest rate of 1.5% is usual. Minimum monthly sales must exceed £5,000. The range of loanable funds is between £5,000 and £250,000 (or up to two months of income). There is a 1-month – 24-month range for terms.

With a stellar 4.8/5 TrustPilot rating based on 291 reviews from their corporate clients, they come highly recommended for both their adaptable service and the availability of a personal relationship manager.

Fleximize was recognised as the “Best Business Finance Provider” at the 2018 British Bank Awards and the “Innovation in the SME Finance Sector” winner at the 2018 Business Moneyfacts Awards.

If you’re a firm that has been turned down for funding elsewhere, we suggest they give Fleximize a try. However, if the rate is stated as low as 1.5% per month, you should exercise extreme caution before committing, since the actual cost is likely to be much higher.

Also, the Fleximize loan has much shorter monthly payback durations as opposed to annual ones, which might be advantageous for certain borrowers but problematic for others.

5. Yorkshire Bank — Trusted local unsecured loans provider for startups

With this bank, a quick online application can be submitted securely in about ten minutes. 

You need to have been in business for 18 months as a limited liability company in the United Kingdom and have one set of financial statements on file with Companies House. There will be a decision in the next 48 hours.

Yorkshire Bank was founded in 1849, but its recent history has been fraught with acquisitions by National Australia Bank in 1990 and CYBG in 2018.

Visit Yorkshire Bank

Unsecured business loans up to £25,000 typically have an annual percentage rate of 10.2%. You need at least £5 million in annual sales. Once again, the maximum unsecured loan amount is £25k. Contract lengths range from one to ten years.

A few years back, Yorkshire Bank underwent a complete rebranding to become Virgin Money. You shouldn't be put off by the rebranding, as ‘business as usual' will continue uninterrupted throughout the changeover.

The application procedure is streamlined at Yorkshire, and they have one of the simplest forms we've encountered for an unsecured business loan. Customers may get an online estimate in 10 minutes and a final verdict in 48 hours. 

Sixty per cent of small and medium-sized enterprises (SMEs) are likely to suggest the Yorkshire business account to other SMEs, placing Yorkshire Bank fifth in an independent CMA assessment of business banking services.

6. Nucleus — Top unsecured business loans for early repayment

Since its inception, Nucleus Commercial Finance has extended loans totalling about £1.2 billion. The bank takes itself in its “human approach”, with staff accessible by phone 24/7, and provides the security and scalability of bank financing with the quick choices of an alternative lender.

Submit your application online. You must have been in business for at least three years, be based in and a legal resident of England and Wales, and show consistent profitability in your most recent financial statements.

Visit Nucleus

The duration of the application procedure, which includes filling out an online form, making a phone call, and exchanging papers, is not specified. However, if an offer is accepted, the money is accessible on the spot.

Borrow between £25,000 and £150,000. There is a wide range of payment plans available, from 3 months to 5 years. Cash Flow Finance is an unsecured loan product offered by Nucleus; in addition to a three-year trade history, eligibility also requires that you own your own house. However, there is no need to panic; they will not make any claims on your possessions. 

Nucleus is an alternative lender, so we may provide discounts for prepayment. If you pay off your loan in full before the end of your term, they’ll knock 10% off your total. The bank has minimal restrictions on how the money may be used, demanding only that it be utilised to grow the firm.

7. Funding Circle — Unsecured loans for businesses with fast account opening

Peer-to-peer lenders act as matchmakers between investors and businesses seeking loans over the Internet. By eliminating the middlemen, both lenders and investors benefit from better rates and more favourable conditions. Since 2014, FCA rules have brought a measure of oversight to the sector, which is urgently needed in light of the recent failures of Lendy and Prosper. 

In 2010, Funding Circle (review) was established as a P2P marketplace. Funding Circle is a lender that has helped over 54,000 firms in the United Kingdom access a total of £5.8 billion in loans, and it has just acquired £150 million in financing from the government-led British Business Bank.

Fund your company with a no-security loan. Please submit your application online. As little as 5 hours is needed to make a choice.

Visit Funding Circle

Annual percentage rates (APRs) typically begin at 1.9 per cent. You may get a loan between £10,000 and £500,000. The repayment schedules range from 6 months to 5 years.

Funding Circle is a P2P lending platform that pools money from tens of thousands of investors and lends it out to small companies. Don't worry, no one investor will be checking in with you since they only loaned you a fraction of a per cent of their total capital.

Funding Circle is a lender that focuses on small companies and has an application procedure that takes less than 10 minutes, as well as personalised service and additional financing if necessary.

Funding Circle found that 90% of its company borrowers would approach them first for a loan rather than a bank, and this makes perfect sense. Funding Circle is a great option because of the reasonable loan terms, low interest rates, and high quantities of cash that are offered.

8. Spotcap — Competitive unsecured business loans for medium and large companies

Spotcap, which has been around since 2014, is an online lender that caters only to small and medium-sized enterprises. The Berlin-based firm also has offices in Spain, the Netherlands, the United Kingdom, Australia, and New Zealand.

Send your application in over the internet or by phone. You need a UK business bank account, a UK physical location, and a company history of at least three years.

Visit B2B Finance Spotcap

Have a decision made within one business day. Withdrawals from an authorised credit line incur a one-time fee of 2% to 5% of the amount withdrawn. The monthly management charge is about 1% of gross revenue. 

Monthly interest rates (averaging 1.4%) are standard. You need a £500,000 annual revenue minimum to qualify. The range of funding is between £50,000 and £350,000 (or up to 8% and 12% of yearly revenue, whichever is lower).

If your business has been running for 3+ years, you may choose a repayment period of 6, 12, or 15 months. If your business has been running for 8+ years, you can choose a repayment time of 24 months. 

Spotcap's website has an open business loan calculator where you can input the loan's principal amount and term to get an instantaneous estimate of the loan's monthly payments.

It's helpful that Spotcap provides this since there are so many different conditions and fees to consider. This calculator will help you determine how much money you can borrow and how much it will cost you.

Spotcap has earned praise for the adaptability of its unsecured business loans. After your request has been authorised, you will have one month to request a withdrawal via the control panel. Then, you may take out as much or as little as you choose, paying interest only on the money you actually spend.

9. Iwoca — Leading alternative unsecured small business loans in the UK

Aiming to make banking “feel like a superpower, not a headache”, iwoca was founded in 2011 with a huge, bold brand that looks to be targeting tiny, independent firms. To date, iwoca has loaned over a billion dollars to more than 50,000 consumers, with over three hundred and thirty million dollars arranged in 2018.

You must be a sole proprietorship, partnership, or limited liability corporation located in the United Kingdom.

Visit Iwoca

Have a decision made within one business day. The origination charge for a business loan is 6%. All loans have a monthly interest rate of between 2% and 6%, depending on the lender. Loan amounts range from £1,000 to £200,000. There are 12-month options available.

An excellent development is the bank's receipt of a ten million pound grant from the Capability and Innovation Fund (CIF), a programme of the Banking Competition Remedies fund. This is a great example of the power of iwoca since it helps to support challenger banks with the goal of increasing competition in the banking system.

The above-mentioned product is only one of several adaptable financing choices available via iwoca. Another alternative is a credit facility known as Credit Lines. Both new and existing businesses may make use of this, however, new businesses have a maximum credit limit of £10,000.

After you've prepared your product, you may get it in whatever quantities you need using a control panel. You can manage your repayments and make penalty-free early payments right here to save money.

More than 3,200 satisfied customers have given them five-star ratings on Trustpilot, demonstrating the success of the company's emphasis on customer service. If you want to spend “less time ticking boxes, more time shipping boxes”, then you should use iwoca.

10. LendingCrowd — Another alternative unsecured business loans provider

LendingCrowd was founded in 2014 and has been helping people “think outside the bank” ever since. And it has done just that, using a financing strategy that is unique among P2P sites and based on an auction system known as the “Loan Market”.

Please submit your application online. You must be a limited liability partnership (LLP) or a corporation limited by shares (2 years of filed accounts showing cashflow suggesting a capacity to repay), have experienced management, and have a solid business strategy in order to be considered. 

Visit LendingCrowd

After a loan auction is completed successfully, a decision will be made within 10 days. All loans obtained via brokers incur an extra cost of 4% of the total loan amount. There is a late charge as well. The initial rate is 5.95%. There has to be at least £100,000 in annual sales. Loan amounts range from £5,000 to £500,000. Six-month to five-year terms are on offer.

A LendingCrowd panel will evaluate your company in around 24 hours so that you may post your capital needs on the loan market. LendingCrowd uses this evaluation to provide a letter grade between A+ and C+, which in turn establishes the interest rate. This might be anything from 5.95% (for an A+ company) to 12.25% (for a C+ company). 

This handbook provides the borrower with all the information they need. Investors on the LendingCrowd Loan Market are either automatically matched with loans or given the option to hand-pick their investments.

LendingCrowd was considered for inclusion here because of its adaptability. LendingCrowd may connect you with investors who are willing to take on more risk in exchange for bigger profits if you have been turned down elsewhere.

Top unsecured business loans — Buying Guide

What should you know about unsecured business loans?

What is an unsecured business loan?

Unsecured commercial loans function in the same manner as unsecured individual loans. Cash is provided to the company, with repayment broken down into monthly or quarterly payments over a certain length of time.

The loan's outstanding balance incurs interest at the agreed-upon fixed or variable interest rate. A lender may add an origination fee to the total amount owed in order to cover their costs in setting up the loan.

In the event that the firm defaults on an unsecured loan, the lender may be left with few options, as opposed to a secured loan where some asset of the business or business owner (such as property) is pledged as security against the debt. Unsecured loans often have a higher interest rate than their secured counterparts since the lender is taking on more risk.

Unsecured loans are more difficult to qualify for and get than secured loans for the same reason. Lenders want assurance that the potential payoff is worth the level of risk being taken.

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Where to look for an unsecured Loan?

Numerous options exist for businesses seeking an unsecured loan.

#1 Bank loans without collateral

Both secured and unsecured medium- to long-term business loans are available at most major banks. Unsecured loans often have higher interest rates and need more extensive underwriting procedures by the lending bank to ensure the borrower firm is solvent.

Since the credit crisis, it has become harder to get unsecured loans from financial institutions. However, it is still a good idea to look at this option since banks provide highly competitive interest rates and cheap arrangement costs.

#2 Peer-to-peer loans without collateral

P2P lending platforms, such as Funding Circle, Zopa, and RateSetter, are a relatively new kind of business lender that provides unsecured loans for terms of up to 5 years.

P2P loan interest rates are competitive with or even lower than those offered by unsecured bank loans, however, they often come with arrangement or completion costs. The absence of prepayment penalties is a major benefit over traditional bank loans.

#3 Loans without collateral from specialised commercial lenders

Many new firms, like ezbob, are challenging traditional banks by providing unsecured, short-term loans. These loans often come with higher interest rates than those offered by banks and P2P lending platforms, but the requirements for receiving one are generally less stringent.

#4 Government-sponsored, unsecured lending programmes

The British Business Bank is a government-backed financial institution that helps companies of all sizes receive lower interest rates on long-term, unsecured loans from traditional financial institutions. A firm that has planned its borrowing needs ahead of time can benefit greatly from such loans, despite the long application procedure.

Unsecured business loan alternatives

Businesses that are wanting to grow or fill a short-term cash flow void have access to more than just unsecured loans.

#1 Guaranteed loans

Putting up collateral for a loan is unnerving because the lender stands to obtain ownership of the business's valuables if the company defaults on its loan payments.

However, it does allow for reduced interest rates if there is a high degree of trust that the firm will be able to repay the loan. Another way to reduce the danger to the company is to utilise the asset that is being purchased with the loan as collateral.

#2 Overdraft provision 

An overdraft facility from a company's usual business bank may be available as an alternative to a loan. Although the interest rate on an overdraft is often greater than that on a loan, it might be utilised to bridge a short-term gap in funding if necessary.

In the same vein as an overdraft, but independent of a checking account, is the revolving credit facility. Instead, the loan is structured as a revolving line of credit, with interest accruing only on the amount actually used by the company. Multiple lenders provide these types of credit lines, and unlike traditional banks, they often don't impose setup costs.

#3 Credit cards for enterprises

Business credit cards, another kind of unsecured financing, may streamline and simplify your daily spending. Although many credit cards provide a 0% interest promotional period on debt transfers and purchases, interest rates on credit cards are often higher than on loans. Each issued card also often incurs an annual fee.

#4 Director-guaranteed loans

If the company's directors agree to bear personal responsibility for repaying the loan, even if the company has a bad credit rating or no assets to use as collateral, the company may be able to acquire unsecured financing.

If you sign a contract obligating you to personally service a debt that your company can't pay back, you essentially give up the liability protections provided by your company's limited liability status and expose yourself to the risk of personal bankruptcy. This choice has to be given great thought.

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Leading unsecured business loans: The Verdict

Hard effort, sturdy bootstraps, and the proper person or plan to walk beside you as you make your way towards financial independence might be your best hope if you are stuck in a debt cycle and want to break free. 

If you're tired of the never-ending cycle of debt and the false promises of so-called “debt relief” businesses, it's time to make a difference. But if you want a different result, you have to try a new approach.

Look into hiring a monetary mentor. A counsellor acts more as a mediator, but a financial coach works with you to achieve your goals. Get out of debt and go towards your lofty financial objectives with their assistance… while constantly boosting your confidence.

For those who see great use in a loan, most people use unsecured loans to take advantage of a good economic climate, to jumpstart expansion, or to simply purchase extra supplies, machinery, and the like.

The ideal method to find the most cost-effective answer for your unsecured business loan is to start with your local bank and see what they may be able to provide.

For more, view our top business loans.

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• Best Business Loans for Bad Credit
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