There are lots of reasons why a business might need some extra money. Some people use unsecured business loans to cover their bills or taxes or pay employees, while others invest the money in new equipment or open another branch. You could also use the money to level up your staff by sending them for additional training, or improve the customer-facing part of your business. You may need to explain your plan to the bank when you apply. Unsecured business loans are pretty flexible in regards to the amount of money loaned and the amount of time taken to pay it back.

There are plenty!

• They’re fast to arrange, and it can just take a few days to get the money
• They’re easy to organise, and you don’t need to get anything valued or involve solicitors
• You don’t need to put any of the business’ assets on the line as collateral or risk losing property
• You can borrow money for up to five years…
• …but if you pay it back before the agreed time period, there’s no early repayment charge

Of course, when you borrow money, you’ll have to pay it back. But unsecured business loans have other costs associated with them, which you’ll need to know about before you organise one. The specifics and amounts will vary with different lenders, but there are three main charges. The first is interest, which is set at a higher rate for unsecured business loans compared to secured business loans. It’s often around 5-20% per year. Because there are a lot of lenders around at the moment, you might be able to shop for a better offer. This can make things feel overwhelming, so you may want to consider your requirements before you start searching.

There’s also the application fee. Some short-term loans don’t have them, but if they do apply they’re usually worth about 1% of the initial amount borrowed. If you pay your loan back on time, those are the only two fees you’ll need to worry about. Some banks will charge a missed payment fee if they don’t get their money on time. These charges vary, so make sure you’ve read through the paperwork thoroughly. Also, as always, it’s a good idea to get copies to refer back to if necessary.

Unfortunately, there are some downsides to getting this type of financing. These are:

• Higher interest rates, and inconsistent interest rates which can vary from 4% to 40%
• They’re only really suitable for short-term loans
• Getting a loan quickly can mean that you don’t have an opportunity to think things through thoroughly, and you may not get the right deal

There’s not a flat amount, but you can usually borrow up to 25% of your annual revenue. Usually, the minimum amount loaned out is £10,000 and the maximum can be over a million pounds! Think carefully about what you need, though, because you’ll be charged interest for whatever you get.

When banks look at offering loans, they rank the clients to determine interest rates. Type A is the best, as it has the lowest interest, and they’re usually offered to businesses which have been trading for more than five years, have good credit scores and high profits. Type B is in the middle and has more interest than Type A, and they’re usually offered to businesses which have been trading for two to four years, with a reasonable credit score and some profits. Finally, there’s Type C, for new businesses with credit issues. For a loan lasting between one to three years, Type A would expect interest of around 4-8%, Type B would expect interest of around 9-15% and Type C would expect interest of between 15-40%.

The application for a loan typically won’t take more than an hour. Most people will get a response within a few working days, but some companies proudly advertise the fact that they’ll approve you in 60 seconds. This is a red flag, and you should make sure that you’re not being screwed over by higher interest rates or other penalties before you accept their offer.

You can do it online, and you’ll need to have a few things to hand. These are: your credit score; the company’s credit rating; information about the company, including start date and turnover; personal information like your address and date of birth; and financial accounts including the past three months’ bank statements. Some lenders would also like to see a plan of what you’re intending to do with their money. The application forms to fill out typically don’t take very long – provided you’ve got this information! Anyone applying for an unsecured business loan would need to be able to prove that they’re making a 10% profit as a minimum.

Now you have everything you need to go out and apply for a unsecured business loan today! Remember to check any paperwork thoroughly and ensure that you’re not agreeing to anything you don’t want, and make sure to speak to someone if there’s something you don’t understand. Please be aware that everything discussed here is applicable to the United Kingdom, and may not work in other countries. Good luck!