Running any kind of professional practice – whether in law, medicine, accountancy or architecture, for example – is a thoroughly demanding exercise. The lion’s share of your efforts is likely to be focused in providing a top-rate, professional level of service to your clients.
This overriding focus might sometimes distract you from the fact that your practice also represents a business that needs to be run.
Running any kind of business is likely to require borrowing from time to time – and that is all part of the challenge facing any professional practice.
Thanks to the services we offer here at Professions Loans, however, finding unsecured business finance is unlikely to present such a great challenge or difficulty – and nothing that distracts from your principal objective to provide top-class, professional services to your clients.
Why look for unsecured business finance?
The finances of your business are likely to be just as professionally managed as the practice itself. But that does not lessen the need for occasional, or even regular, short-term borrowing to meet such needs, requirements and challenges of, for example:
- finance for the acquisition of new equipment or IT systems;
- an increase in the general working capital available to your practice;
- the need to meet annual requirements for professional indemnity insurance cover for your practising partners;
- the ongoing need to meet general taxation and VAT liabilities; or
- funding to clear accumulated debt or past borrowing commitments.
The benefits of unsecured finance
Unsecured business finance may typically offer a more straight forward and potentially more cost-effective alternative to longer-term, secured borrowing.
Secured loans may be the traditional go-to method for raising additional working capital for your business. Just as the term suggests, this is borrowing guaranteed by the security of assets you have to offer – whether these are business assets or those owned by you or your partners personally.
Those assets you use to secure any loan remain at risk throughout the term of any such loan, of course, and if your business encounters any difficulty in making repayments or defaults on them, the assets may be repossessed by the lender. The security of the assets, in other words, continues to ride on the financial fortunes of the business.
An unsecured loan avoids such risks altogether, since no assets need to be pledged as security.
The repayment period for a secured loan is typically relatively long-term – ten to 15 years might be a common term. This represents a long-term commitment for your business, during which repayments on the loan need to be made each month.
Those repayments also include an element of interest, the total amount of which mounts steadily throughout the period of the secured loan and is likely to represent a considerable expense over the entire period.
What is more, many secured loans have a variable rate of interest – one which is likely to increase in line with any change in the Bank of England base rate (which is itself currently forecast to be raised sometime in mid-2018).
Our unsecured loans, however, have the advantage of a fixed rate from day one. You know exactly what the monthly repayments are going to be throughout the term of the loan, thus making cashflow management of your business considerably more straight forward.
An unsecured fixed rate loan is also extremely flexible both in the amount you may choose to borrow and the period over which repayments are to be made. Repayment terms may be as short as just six months or might extend to as long as five years – but in either case, the relatively short-term nature of such borrowing means that the total amount of interest that accrues may be less than any longer-term secured loan.
Both the amount you choose to borrow and the repayment options you decide are likely to be determined by the purpose of the loan. If you are looking to raise finance for the purchase or lease or major assets, for example, you might be looking to borrow a relatively large amount over as long a period as five years.
In order to meet an immediate and temporary shortfall in working capital or to ease cashflow problems, on the other hand, a smaller loan, borrowed over a shorter period, may be more suitable. Into this category, for example, might fall your ongoing tax and VAT liabilities and the use of a fixed rate, unsecured loan to spread out your payment of those liabilities throughout the whole year. By rolling one unsecured loan through to successive annual, short-term loans, you might discover that this is an effective way for your business to manage its continuing tax liabilities.
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