For anyone considering an application for a business loan, it is a smart idea to become aware of the different loan types available on the market. Many different lending institutions offer either unsecured or secured business loans, but which one is the best choice?
Secured Business Loans
Whether you are borrowing a smaller sum of money such as $5,000, or a larger quantity of $300,000 or more, it is wise to understand how different secured and unsecured loans are. Secured loans require you to have assets, whether they are personal or business, to attach to the loan, whilst an unsecured business loan does not require any assets or collateral be offered.
If you fail to complete loan repayments, the lending institution is able to take ownership over the item you put up as your promise of collateral. If the funds raised from taking ownership of the collateral doesn’t cover the full amount of what is required, you will have lost your previously secure item and will still owe an outstanding sum to your lending institution!
Meanwhile, the requirements from lenders are greatly different for unsecured business loans. You do not have to put up any collateral, so as a result, unsecured business loans are more flexible but do traditionally come with slightly higher fee structures. This is because the financier is taking on greater risk. Unsecured business loans are generally assessed on both the current health and future potential of your business and not just the strength or weakness of your credit rating.
For some businesses, seeking an unsecured business loan may be their best option, depending on the circumstances around their current business situation and environment.
If you’re looking for a quick and simple loan solution and would like some more information about secured and unsecured loans, talk to Unsecured Finance Australia about how we can help you meet your unsecured finance needs.