Are you considering taking out loan to fund your business? Before running off to sign for a loan, make sure you’re aware of your financial options!
There are two types of business loans, and each comes with its own set of pros and cons. Read on to learn the difference between secured business loans and unsecured business loans, as well as which option is best for your financial situation.
Secured Business Loans
Secured business loans require the applicant to offer up an asset as collateral should the applicant be unable to repay the loan. Many people choose to offer up a car or boat as their collateral, but one can also use property deeds, valuable art, or white goods to meet requirements.
One of the benefits of opting for a secured business loan is the lower interest rate that accompanies it. Because secured business loans are less risky for the lender, the lender is more likely to grant you the loan and at an interest rate that’s kinder to your bank account. That being said, if you fail to repay the loan on time, you risk the chance of losing the valuables you signed over as collateral.
If you have assets you’re willing to gamble with and know you’ll be able to pay the loan back on time, a secured business loan is a great option since you’ll incur the least amount of interest in the process.
Unsecured Business Loans
Unsecured business loans don’t require the applicant to offer up any assets, making it a good fit for a student or someone after a small loan. The downside? You’ll likely be hit with a high-interest rate. If you fail to pay back your unsecured business loans on time, your credit rating will be damaged, making it more difficult for you to receive approval for a future loan.
Unsecured business loans are also difficult to get, as the loan is a greater financial risk for the lender. The lender will require ample background information during the decision-making process, so the applicant will need a favourable credit history to receive an unsecured business loan.
If you’re still unsure which type of business loan best suits your goals and financial situation, chat with one of us at Speedy Finance for a closer look at your options. As responsible lenders, we’re here to make sure you receive the loans you need under the circumstances that work best for you. Whether you end up applying for a secured business loans or unsecured business loan, your small business will soon be on its way to flourishing!