An unsecured business loan, overdraft or line of credit could provide your client with the funds they need for their business without the need for security or any collateral. Common uses of these types of finance are a short term cash-boost to grow their business, pay suppliers, pay wages, or to invest in marketing.
The need to know
- For an unsecured business loans, overdrafts and line of credits, the financial health of your client's business and their credit score have a larger approval impact than in a secured loan scenario.
- With unsecured business loans, there is no security required, there is little paperwork, and can be written much quicker than other loan products.
- Overdrafts and lines of credit provide a set amount of funds your client can draw down and pay back as needed. Interest is often only charged on any amount that is drawn and the funds can be drawn or repaid at almost any time depending on the lender.
- These types of loans are short-term in nature. Depending on the lender, unsecured business loans, overdrafts or lines of credit can have terms of 3 to 36 months. Some peer-to-business lenders however can provide an unsecured business loan for up to 5 years.
Categories of loans
Like home lending, there are multiple type of unsecured loans, overdrafts and line of credit products available depending on loan need and credit profile of the business looking to borrow.
| Metric | Full doc | Low doc | Specialist |
|---|---|---|---|
| Amount | $5k – $5m | $5k – $250k | $5k – $250k |
| Term | 6 months – 5 years | 6 months – 2 years | 6 – 12 months |
| Rates | 9 – 27% p.a. | 20 – 40% p.a. | 30 – 50%+ p.a. |
| Fees | 0 – 6% | 0 – 3.5% | 0 – 3% |
| Key requirements | • Up to 2 years financials • ATO Portal outputs • 6 months bank statements |
• 6 months bank statements | • 6 months bank statements • Need credit fast • Clear exit strategy • Credit issues resolved |
Key acceptance criteria
For a high chance of approval, a business must satisfy at least 3 of the below criteria.
- Business has been trading at least 6 months
- Business financials are available
- Demonstrates history of profitability
- Average monthly sales of over 80% of the proposed loan amount
- No other significant unsecured debt
- Clean credit file for the last 2 years or minor credit issues resolved
Example scenario
Growth opportunity
A clothing retailer based in Melbourne CBD needed $150k for a combination of purposes including buying stock, purchase of a new distribution licence and marketing. The banks wouldn’t help as the business had a small ATO payment plan and no property to secure the loan.
Key transaction terms
- Amount – $150k
- Loan term – 12 months
- Product – Low-doc unsecured
- Result – The Valiant team was able to secure a fast low-doc loan based on the clients past sales
More information
For more information on the above loan types, you can read more about them at Valiant. Check out the links below.
For more information on Connective's partnership with Valiant or Valiant's business loan platform please contact your Broker Support Manager, Valiant BDM, by calling them on 02 9571 0218 or connective@valiant.finance
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