Unsecured business loans: what lenders actually look for

Unsecured does not mean unconditional

An unsecured business loan is not tied to a specific asset such as property or machinery, but lenders still want comfort that they will be repaid. In practice that comfort usually comes from three places: the trading performance of the business, the conduct of its bank account and a personal guarantee from one or more directors.

The core documents

Most unsecured lenders will ask for a similar pack. Having it ready before you apply is the single easiest way to avoid delay.

• The last six months of business bank statements, ideally as downloaded PDFs
• The most recent filed accounts and, if they are more than nine months old, management accounts
• Details of existing finance agreements and monthly repayments
• Photo ID and proof of address for each director

How bank statements are read

Underwriters look at average monthly credits, the lowest balance in each month, any returned direct debits and whether the account regularly goes overdrawn beyond its limit. A business with steady inbound receipts and few bounced payments will usually price better than one with higher turnover but erratic conduct.

Personal guarantees

Almost every unsecured facility above a modest size will carry a personal guarantee. Read the guarantee carefully: some are capped at a percentage of the loan, others are unlimited. Some lenders offer optional guarantee insurance. A broker can tell you which funders are more flexible on this point before you apply.

Before you apply

Check that your filed accounts at Companies House are up to date, that there are no unexplained gaps in your bank statements, and that you can explain clearly what the money is for and how it will be repaid. A clear purpose and a realistic repayment story matter as much as the numbers.