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Why Unsecured Business Term Loans are Ideal for Startups and SMEs

At one point or another, SMEs, small businesses, and start ups would need additional financial support to run their venture.

Applying for a typical, secured loan would require collateral, which not all small business owners can meet. So what other options can they consider for their funding needs?

An unsecured business term loan in Singapore is ideal as the requirements are a lot less stringent. 

What are unsecured business term loans?

Lenders offer unsecured business loans or loans that don’t have to be asset-backed to help small businesses attain their financial requirements. They may need the extra funds to develop new products, expand their business, or purchase new equipment.

Since collateral is not required, the risks are higher for the lending institutions, so they may also charge higher interest rates. But it’s always possible to find financial service providers with flexible and affordable offers.

For instance, business owners are free to allocate the funds where they see fit. Some lenders also offer options for customised long-term financial solutions.

Why are these types of loans suitable for SMEs and startups?

Easy application. The conventional loan application process can be tedious, whereas unsecured loans are typically simpler to navigate. Lenders ask for fewer documents and can be more lenient than other financial institutions. The timeline for approval is also faster. If you're looking for a microloan for startups, it can be beneficial to consider these options, especially during emergencies where you cannot afford to wait long for disbursements.

Not asset-backed. Unsecured business term loans not only require fewer documents but also do not require an asset as collateral. Even those just starting their business can seek financial support and increase their chances of approval.

Flexible. You enjoy the liberty to use the funds however you prefer. The lender usually doesn’t impose restrictions on usage. These business loans are often flexible, too. Even if the initial offer is for a short duration, you may still have the opportunity to negotiate the repayment schedule. So, even if the company's performance is not consistently good, and there are lean months, the chances of you being able to manage payments are higher.

Affordable. Another factor that makes an unsecured business term loan in Singapore ideal for SMEs and startups is its competitive rate. While some lenders may charge higher fees, there are also those that offer low interest. You do not have to choose between immediate financial aid and manageable fees, because you can access both.

Allowing full ownership. In some cases, small enterprises seek funding from venture capitalists or angel investors. However, this also implies that the organisation will begin to share ownership of the company. With business term loans, you keep your ownership intact. 

The maximum amount for unsecured business loans varies. 

Before signing up for microloan for startups, get to know the lending institution. See if they can tailor solutions around your business objectives, if the team is easy to communicate with, and if there are opportunities for repayment adjustments.

Huge financial players aren’t your only option. You also don’t have to settle for high borrowing costs.