An unsecured business loan is one of the best funding options for various types of businesses that don’t own many assets. It is ideal for business owners that would like to secure a loan to grow their small businesses in NZ but would prefer not to offer their personal properties as collateral and risk losing it to lenders in case of unforeseen circumstances in their business.
With a variety of lenders that can offer $5,000 to $250,000 unsecured business loan for any type of business in NZ, and they offer several options for a wide variety of options.
Read more and find out why an unsecured loan can be the most ideal loan for you and your business.
Why most business owners prefer an unsecured business loan over secured business loans?
The most obvious reason is that unsecured business loans don’t require security. Unlike secured business loans that use assets as security, which means the lender can go after your property in case things don’t work out in your business.
Lenders’ can literally sell your assets to recoup the cost of the loan you acquired. For this reason, small businesses in New Zealand usually choose unsecured small business loans over secured loans due to its steep requirements.
In fact, for you to be able to get a secured loan, it is essential that you have assets on hand, which is a primary requirement that you need to show the lenders.
However, this is NOT always the case for the business owner, especially if you’re a consultancy or software company that don’t have that many tangible assets. Most likely you will only have a few computers, rented office and not much else.
This is where an unsecured business loans come in because there are lenders who can lend up to $250,000 in the right circumstances. Since there is no security involved in unsecured loans, your trading history is the most vital piece of information that you need to supply to lenders.
Lenders might even ask you for a personal guarantee before they can lend you the funds that your business needs.
Why unsecured business loan can be the right type of loan for you?
Unsecured small business loans are almost always quicker to acquire because there’s no need for valuations and the legal process is much simpler
You don’t need to risk your assets just to get the loan, so it’s more accessible to different types of businesses
Up front costs are lower than secured loans
The only thing that you need to consider is the fact that overall it might cost a little more because lenders have a higher risk in providing unsecured business loans to your business.
What about interest rates for unsecured loans?
The interest rates will vary depending on your business profile, because there are several risk factors that lender will consider before they can lend you the money that you need for your business.
Basically, if the risk is higher for the lenders, then you can expect the interest rates will also go up.
Your credit rating is also one of the best indicators of what interest rate you’ll pay for your business loan. So, if your credit history is poor, you will most likely pay a much higher interest rate compared if you have a good credit rating.
Lenders will also consider the current state of your business in New Zealand and how established it is at the moment. They will also want to know its profitability, because these factors will determine if you will be able to afford your loan or not.
Overall, it’s important to remember that interest rates will include several costs such as termination, penalty fees, and arrangement.