Unsecured finance - the Holy Grail?

If you want to stimulate enquiries in the world of business finance, can I suggest that you ignore financial incentives such as 'interest free' or 'low cost' and plump instead for the ever friendly 'unsecured'.

In its purest - and literal - form, unsecured means exactly that - a loan, overdraft or other facility which stands on its own 2 feet, relying entirely on the customer's ability to repay. Should the business fail then the lender licks their woulds and carries the loss.

From a borrower's perspective this is as good as it can get  but in reality these facilities, whilst available, are not available to all and do require in-depth information to get underwritten.

So, the logical next step is to consider how lending can be secured to the satisfaction of all parties.

The main anxiety of 'secured finance' is a second (or third) charge over the home of the borrower; quite apart from the marital discord this can cause (it is best that you don't forge your husband/wife's signature - the courts take a dim view) it is problematic for both lender and borrower, since mainstream banks really aren't keen to put families out on the street, so negotiations are long and protracted, which can add to stress and disharmony.

Whilst we do write a small number of these loans, I am at pains to point out the very real downsides to hocking your home against a business venture.

From an internal/lender perspective the concept of security is somewhat different; what we are really interested in are assets which can be realised relatively quickly and easily; classic examples are invoices, cars, plant and machinery and freehold business premises.

With the emergence of a whole new raft of lenders, sourced from amongst the crowd or private enterprise, the range of eligible security is growing ever wider and can now include:

- Confirmed orders / finished goods.
- Works of art.
- Listed stocks and shares.
- Boats /aircraft.
- Gold / jewellery
- Credit card receipts
- Classic vehicles.

The list is extensive and growing, so the examples given above are simply a starting point.

With a properly set up deal, the much disputed director's guarantee becomes a secondary consideration - as long as the car you have offered hasn't been trashed or salvaged, there should be no financial liability.

And let's face it, your wife probably won't leave you if you lose the Aston!