Secured Vs Unsecured loans
Business is all about investing money and procuring profit. The total life cycle of the business turns around money. An entrepreneur needs money in the business at different stages like start-ups needs, working capital needs equipment purchasing and much more. Not every entrepreneur will be able to fund his own money into the business at all the stages of business cycle. This is the juncture where a business owner looks for business loans that will help in aiding his financial needs. The current article aims at throwing insights about two types of business lending available for the entrepreneur and helps him to take an informed decision about the best bet for the business.
Unsecured business loan
Every business owner would love to obtain third-party financing without any collateral so, let’s talk about small unsecured business loans first. As the name suggests, these loans are issued by the banks to the business owners without asking for security. These loans are hard to qualify for. Once qualified, you will get easy loan approval as no security is involved. Your good credit history plays a key role in approval of unsecured business loans. Coming to the pitfalls of these unsecured business loans, the lender compensates the risk of defaulting unsecured business lending with high interest rate. The interest rate you pay throughout the loan tenure is much higher than for same amount in the secured loan. You can choose to go with this type of loan if you have good credit history but, no collateral to pledge.
Secured business loan
These secured business loans insist borrower to pledge some collateral to procure the loan. The product/ property you pledge should be equal/ more to the loan amount that is sanctioned by the lender. Simply put, in case you default the loan or become bankrupt, the lender has right take that pledged property to defray costs of your debts. You can pledge anything like car, house, equipment and inventory. As these loan carry collateral to the loan amount sanctioned, the interest on these loans is less and you will be away from the burden of high monthly repayments. There are good chances of the approval as it poses less risk to the lenders. Pledge a property that are ready to lose even in case if you default your loan (future is never certain). It will be easier to fetch these loans if you have recently valued the property that are pledging because you can easily convince the lender.
Now you have good outlook towards secured and unsecured business loans, take a moment and decide about the best bet for business tomorrow. You need to stay calculated on the amount you need for business and there is nothing wrong in credit report from the reputed agencies and make corrections (if any), especially when you are looking for unsecured loan.
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