Business Finance Solutions

Karl Zindren asked:

There are many advantages and disadvantages to unsecured small business loans compared to secured small business loans. Unsecured small business loans do not require collateral, but they do require guarantees if you are getting a conventional unsecured small business loan. Lenders need to feel more at ease with an unsecured small business loan since they only have your legal word you will pay the loan back. Therefore, lenders tend to raise interest rates on an unsecured small business loan to help protect themselves against possibly not getting paid back the full amount. It is therefore harder to get an unsecured small business loan than a secured business loan since with an unsecured business loan, lenders will feel too uncomfortable lending out the money if they see you as a high risk business deal, especially if you have bad credit, if your business is just starting out, or if your business cannot prove that it has a sufficient positive cash flow, or that it is not stable enough.

If you are having a hard time getting an unsecured small business loan however, there are loan agencies such as small business administration (SBA) loan agencies that strive to help small businesses get the unsecured loans they need that they cannot get themselves. Using an SBA loan agency will greatly increase your chances of being able to get an unsecured small business loan since they make guarantees to the lenders, and they work with the lenders to help ensure you will be able to get the loan.

With secured business loans, you have to put your assets up as collateral that are worth the same amount as the loan amount. Therefore, if you default on the loan, you will lose your assets. With secured business loans, although you are at risk for losing your assets, chances are you will be able to enjoy lower interest rates since lenders will know that should you default on the loan, they can always sell your assets to pay themselves back. Your assets for a secured business loan do not have to be from the business directly, nor do they have to be tangible items. Assets can be stocks, bonds, money value of insurances, or even your house.

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