Getting a business loan may not always require real collateral. Unsecured loans often have a personal guarantee, ie a debt guarantee.
At different stages of the business, the company may face situations in which running the business requires additional funding. Typically, such as a moment is in the start-up phase of a business, where a business loan is needed to get started. However, companies that have been in business for a longer period of time often find themselves in a lifecycle situation where additional funding is needed to continue operating or for example to grow their business.
The company can apply for a loan from a bank or private lenders. Depending on the situation, the lender usually requires some kind of security in exchange for the loan. A bank loan almost always requires real collateral, while private lenders can provide so-called unsecured loans, which only require personal collateral to secure the loan.
Real collateral vs. personal guarantee as collateral for a loan
When considering a company loan needs, it is first and foremost good to find out what collateral is required by each lender and what the real collateral or personal guarantee of a loan really means.
Real collateral refers to the physical assets given as collateral for a loan. Physical assets can be, for example, a property, a car or a forest parcel. Dedicated housing can serve as real security for mortgages. In real-collateralized loans, the interest rate is usually lower because real-life collateral decreases the risk of the lender. If the borrower is unable to repay the loan, the bank or other body can easily realize the physical security.
Not always a company may have real collateral to support a loan. In this case, the alternative is the personal guarantee of the loan. A personal guarantee as collateral for a loan means that in addition to the main debtor, an individual undertakes to take responsibility for the debt. Self-indemnity guarantee means practically the same thing. When applying for a business loan, a private individual, such as the entrepreneur himself, can self-indemnify the loan. This means that the person in question is liable for the debt as if it were his own debt. If the company is unable to repay the debt, it will be charged all the costs, interest and recovery costs to the individual guarantor.
You do not need to have real collateral for a Personal Payday corporate loan, but a personal guarantee is always required to get it. One loan is enough for a loan of EUR 20,000, while loans above this amount require two guarantors.
Keep these things in mind
When an individual guarantees a loan with a self-debt guarantee, he is liable for the debt as if it were his own debt. If the original debtor defaults on his repayment obligation, the guarantor shall be fully liable for the debt, together with any costs.
In an unsecured corporate loan, the personal guarantor can be the entrepreneur himself or others working for the company. The personal guarantor can also be an external person. The personal guarantor has the right to obtain information on the debtor’s solvency, debt and other possible collateral. The personal guarantor also has a statutory right to know how the debtor has dealt with his debt.
The personal finances of the person becoming a guarantor should be in order before becoming a guarantor. In the event of default by the main debtor, the lender will turn directly to the guarantor. Becoming a personal guarantor can also affect how the guarantor itself borrows when needed elsewhere.
Creditworthiness company and approved loan amount
For Personal Payday Corporate Finance, a creditworthiness company and approved loan amount is calculated based on an estimate of the business of the company. In order to qualify for an unsecured Personal Payday loan, the company must be a Finnish company registered in the Trade Register and be reputable by those in charge. In addition, the company or its guarantors must not be in default of payment.
Applying for a Personal Payday loan online is quick and easy when the necessary criteria are met. The terms and conditions of the loan and guarantee can also be conveniently signed electronically online.
Does your company need a loan? Feel free to contact us and we will help you with your financing!