The process of getting a short term unsecured business loan for a SME has changed since the financial crisis. Before 2007 High Street banks gave authority to local managers to review a business plan, get to know a business owner and they could make lending decisions at local level. This meant they could fund start-ups or established businesses as they saw appropriate.
Since the crisis, this local level authority has been severely curtailed and now business owners are less certain where to get unsecured business loans. This has allowed new lenders to enter the market and focus exclusively on SMEs, lending their own private capital. So, how do you get an unsecured business loan? The new lenders have brought with them new ways of looking at lending and it now comes down to three things:
- A credit check on the company and its Directors
should be reasonably clean
- The company needs to be able to show it can
afford the loan
- If there are any issues with points 1 and 2 then
we look at the value of the personal guarantee offered by Directors (a PG will
almost always be required these days) and in this regard a clean credit record
will be required and it helps (but is not essential) if they are a home owner
with equity in their property
For point 1, be aware that a full credit check will need to be done
For point 2, lenders are flexible here and any combination of full accounts, management accounts, bank statements, VAT statements or even just merchant terminal statements is usually all that is needed
For point 3, a LTV of below 60% is preferable.
There are many options and at Choice Loans our job is to help you get the unsecured business loan best for you.
