To many traditional banks these small loans are not profitable due to underwriting costs and present a higher default risk to the bank.
Another issue is the requirement to secure the loan with your assets, most commonly the family home. If the business goes belly up you lose everything, and in some cases the wife and kids go too, as its all too much for the family to bear. Many small business owners do not have security to use despite having a profitable business model.
Considering that 91% of small business state 'access to working capital' as the top area of concern, we look to alternative funding or 'fintech' lenders who through advanced technology and LEAN underwriting processes now provide the solution to this funding gap for small business. With lower overheads and less stringent regulatary requirements to administer, alternative online lenders can finance small business by offering unsecured short-term loans where the banks cannot meet this market.
Careful consideration needs to be applied when considering alternative sources of capital. There must be a clear strategy to moving the business forward rather than falling into a debt trap.
Beneficial uses of unsecured short-term business loans are:
- Ordering new stock or equipment that is guaranteed to sell or be used to facilitate a sale. Ideal if accessed at the back of a large purchase order secured via a deposit.
- Hiring new staff or contractors after winning a tender or upskilling your workforce to deliver the project on time and within budget.
- Renovations or upgrades to shop fronts, hotels or restaurants to increase capacity, customer experience to remain competitive or meet changing consumer trends.
- Initial capital for R & D while you wait for goverments grants and R & D tax rebates
- Bridging finance to cover cash short falls.
- Capital Raising to attract debt or equity capital for the private market.
Small business is the backbone of any economy and providing easier access to capital in a competitive market is paramount to its survival. Many small businesses have put their lives on the line to create new opportunties for their families and their communities. Good government policy and open access to global funding markets provides a stronger base for small business to access capital.
Visit Accrutus Capital for unsecured business loans to $200K for the hospitality sector. If you require equipment now, get your equipment FREE quote for capital finance now!
