The different types of unsecured business loans and when to get them

Estimated reading time: 2 mins

Unsecured business loans represent the pinnacle of financial aid and can be godsend to a business that isn’t doing that well or just needs a little push to succeed. However, not knowing the fine differences between the various types of loans can lead to you not going for the one that you can use most. We’re going to give you some insight on the three types of unsecured business loans, so that you know what you should go for if your business needs the money.

Short term business loans

When it comes to unsecured business financing, short term business loans are generally the faster solution. They can be characterized as having higher APRs, but also offer quicker funding time which can be essential in some situations. If you need the money fast, a short term business loan will set you up in no more than three days. Keep in mind however that for this you are exposing yourself to a higher APR that can go even as high as 40%.

Receivable financing

You might have heard about receivable financing before and didn’t even know it, because it can go under other names as well. It is also called accounts receivable financing or invoice factoring. It characterizes by offering lump sum payments to businesses in return for future invoices. There is usually a 90 day cap as far as how far into the future you’re looking. It is a solid solution to overcome cash flow problems and can be very beneficial to businesses that rely on invoicing customers.

MCA or Merchant Cash Advance

This type of financial aid will give the business a lump sum of financing and the way that sum is repaid, is through a set share of daily receivables on credit and debit cards. So if the business opts for a merchant cash advance, it will pay back with a percentage of what it makes daily, which will be subtracted from their credit cards as well as debit cards. The main benefit here is that the set payment is based on daily income percentages, meaning that you just give back a portion of what you make, and you don’t have to come up with a precise number every day.

If you are thinking about getting an unsecured business loan, these are your options. However there are also alternatives that might suit your business even more. For example, instead of an unsecured business loan, you might be better off with a small business credit card or by looking for help in the peer to peer loan spectrum. Even though the unsecured business loan options can be of much help, it’s best to properly research your options before committing to any of them.


About the author /

Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Applied Change, a Business Change consultancy based in the UK. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development.

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