Why Your Small Business Should Consider Unsecured Business Loans
Many times when a business owner needs financing, they immediately work towards a secure loan. However, there are unsecured options out there that may actually be a better fit. Before you jump into a secured loan, take the time to learn more about unsecured business loans and see if they are the best option for your business.
One of the best things about unsecured business loans is they don’t require anything, like assets, to secure them. If you have a new business with few assets, then this is a blessing. In addition, if you have assets but don’t own them outright, then this type of loan would work nicely. Many times with a new business, lenders expect you to use personal assets to secure a loan. With this type of loan, you don’t have to even worry about putting your personal assets at risk.
A Couple Options
There are usually a couple options for the type of unsecured loan you can get. One option is a standard loan. You are lent a bulk sum of money that you then make payments on to pay back. The other option is a line of credit. With a line of credit, you are given an amount of money you can borrow and you borrow it as you need it. Pay back works the same in this instance. When you borrow money, you make monthly payments to pay it back.
Factors to Qualify
Because the loan is unsecured, it is riskier for the lender. This means they have more requirements you must meet. Generally, the loan will be based on your credit history and how well your business is doing. If your own credit is in good shape and your business has been doing well, then you should be able to secure this type of loan.
Things to Consider
A perk of an unsecured loan, besides the fact that it is unsecured, is that you can usually qualify for higher amounts. This is because a traditional secured loan is often based on the value of the assets being used to secure the loan. Also, due to not needed to assess assets, the loan process is usually quicker.
Paying off an unsecured debt also will boost your credit. It will help you to build a good relationship with the lender. This sets you up nicely for the future when you may need to borrow again.
Getting unsecured business loans is an option well worth considering. While you may worry that you won’t qualify, it never hurts to give it shot. With good personal credit and a solid business, you are very likely to be approved.