Should You Get an Unsecured Business Loan?
You can either get a secured business loan which is backed by some form of collateral whether it be the real estate of your company or some personal collateral, or you can get unsecured business loans.
On the surface it seems that an unsecured one may be the best option as it exposes you to less risk than needing to have some collateral which you may not wish to lose.
However there are some mitigating factors which should be considered also.
Unsecured versions typically have a higher interest rate than a secured loan.
This is because there is more risk involved for the person who is bringing you the money in the first place.
If you are unable to make your payments on time then there is little recourse for them to get their money back.
Of course they still have the option to attempt to obtain their money through the courts but this is a more nebulous and slower process than simply repossessing a piece of property which is agreed to be available in case of default at the time that the money was borrowed.
This difference in interest rate can have a profound impact on your total payments and should be weighed heavily.
Also unsecured business loans can be somewhat difficult to obtain for new or established businesses as they do not have the credit to prove that they are able and willing to make back payments in a timely fashion.
If you need funding quickly you may wish to secure your loan.