Today will be making a comparison between unsecured small business loans and secured loans. Both of these sources of funding have some advantages and disadvantages which we will discuss in further detail.
Unsecured loans for your small business are not backed by any specific capital and as such represent slightly less risk to you and slightly more risk to the lender. Unsecured loans also typically have slightly higher interest rates for this reason. Conversely, a secured loan will be backed by a specific asset and as such will have a lower interest rate on average.
When attempting to decide whether or not to seek out unsecured small business loans or secured loans it is important to take into consideration the context under which you are borrowing. If you are attempting to pay for large-scale or long-term goals then it may be beneficial to seek out a secured loan. Typically you can secure these loans with the asset which you are purchasing, as when you are borrowing for the purpose of purchasing additional real estate for your company.
On the other hand if you are attempting to pay for short-term goals such as your immediate funding needs for things such as payroll or for immediate expansion you may want to get unsecured small business loans. The reason for this is that loans of this type are typically easier to obtain and faster. You may not be able to capture new business opportunities fast enough if you’re waiting for funding. It is also a good idea to have available credit on hand for immediate needs in the form of an unsecured line of credit. Alternatively if you require immediate funding and do not meet the criteria for an unsecured loan you may wish to seek out a business cash advance. Advances of this type are expensive however and should only be considered for emergency purposes.
Essentially when making a choice between unsecured small business loans and secured loans you are making a trade-off between the additional risk of securing a loan with an asset particularly if this is a personal asset and not a business asset and the advantage that secured loans provide in that they have lower interest rates. Unsecured loans typically cost more money and are faster and which option you choose depends on the circumstances under which you are borrowing. As always I recommend that you sit down with your accountant to discuss these options in detail so that you can make an informed decision about your financial plans.
For more information, go to unsecured business loans at https://saramgsilva.com/business-loans/unsecured-business-loan