No business can stand without financial support and every business owner knows this fact. If you search the market, you can find hundreds of lending companies offering different types of loans – business loans and start up loans included.
Many lenders offer secured business financing loans that require collateral. Home properties, vehicles, lots and other valuable assets can be submitted as collateral for the loan. However, because of its higher value, many borrowers submit their homes in exchange for a higher loan amount. Add to this, secured loans are accompanied with much lower interest rates and fees when compared to unsecured loans.
Unsecured Business Loan- Is It for You?
Still, some entrepreneurs prefer to obtain unsecured business loans. Why so? One reason may be the absence of a suitable property for collateral. Not everyone has a home property to submit while others may not be comfortable with the idea of putting their home on the line. There are homeowners who are not willing to submit their properties as collateral. For these people, an unsecured financing loan is the best option.
Are unsecured loans really safer than secured loans? Since these types of loans are not tied up to any property, it eliminates the possibility of repossession. Nevertheless, this doesn’t mean that borrowers of unsecured loans should relax on their payment obligations. It’s important to remember that an unsecured loan lender can pursue legal action against the borrower, if he or she fails to keep up with his payment.
In addition, unsecured loans are accompanied with higher interest rates than secured loans. Understandably, since it poses greater risk to the lending company, lenders also want to make sure that their customers can bring them profit throughout their repayment period.
Does this mean you should settle for lenders that charge unreasonable rates and costs? Certainly not! If you do your research well, you can find lending companies that offer unsecured business loans with reasonable rates and terms.
Is it easy to get approved for an unsecured business loan? Most lenders would demand a good or excellent credit history. If you enjoy an excellent credit rating, you should have no problem getting your loan application approved. But what if you have a poor credit score? Does this mean you can never obtain an unsecured loan?
The good news is, you can find lenders who extend unsecured loans even for those with bad credit. However, these loans may come with more expensive interest rates than unsecured loans that require good credit. Also, unsecured bad credit business loans may be accompanied with more restrictions such as a shorter repayment period, lower loan limit, and higher late penalty charges.
Again, look for lenders that offer reasonable fees and conditions. Make sure that you’ve taken time to examine the contract before signing up with your chosen lender. Remember, a bad credit unsecured business loan can help you improve your credit history if you’re consistent with your payments throughout your repayment period. Lastly, regardless of the type of business loan you choose, make sure that the money would be utilized efficiently to avoid problems or complications.
About the Author
Sandra Thompson is a loan consultant with Unsecured Loans Now and has been providing consumers and business owners with Unsecured Loans since 1989. For years she has helped people with loan and credit problems especially pertaining to Unsecured Personal Loans, Business Loans and Unsecured Credit Cards. Copyright 2008.