What to know about unsecured business loans for your small business

Business loans are very common nowadays. You can find many ways of financing your business with borrowed money, and all depends on the needs, the purposes and the business’ current situation.

Many owners turn to unsecured business loans, which are almost the same as what you would think a loan is. It is available for different amounts and different lengths of time.  

But what is an unsecured small business loan? If you want to take this type of loan, you have to know that you don’t need to put any asset as collateral against the loan, meaning there is no need to secure it. 

So, at a first look, is more like the lender agrees to give you the financial help without a collateral, thus showing confidence in the paying back of the loan. The most solid way to convince a lender for this action is to have a good income.

Anyway, the lender has to have some sort of certainty to give you the money, so a personal guarantee will be signed. This is needed to assure that the loan will be payed personally by whoever signs to do so, in the event the business fails to repay the entire loan.

Even though it may raise some eyebrows, the unsecured loan will come with its share of disadvantages, as well advantages.

Advantages:

Besides the lack of requirements for collaterals, the main advantage is the speed of the approval and the fact it involves less paperwork than the secured loans.

Other advantages mean asset protection, because the lender cannot seize then in order to fulfill the loan payment, and the possibility of taking larger loans. This is because collaterals limit the loan amount through their value.

Disadvantages:

On the other hand, having to put up for personal guarantees isn’t the only disadvantage. There are also higher rates, because obviously this type of loan poses a higher risk for the lender, and possibly shorter terms because of the greater risks involved.

Also, there are certain qualifications which must be met in order to receive an unsecured business loan. For example, the annual revenue of the business, the daily balance, but also the personal credit score, because of the guarantees presented before.

And, even if collaterals haven’t put up to secure the loan, the lender can still sue the business owner to retrieve the money. The personal and the business credit scores would also be severely affected in this case.

How to get the unsecured business loan:

There are some simple and easy steps to get it:

1.     Submit a simple and fast online application.

2.     Upload the most recent banking documents.

3.     Instantly check the loan eligibility.

4.     Receive the funds in a short period of time specified by the lender.

The need for the unsecured – thus, uncollateralized business loans – is that almost a third of the US companies who seek a loan are rejected due to the collaterals being insufficient.

Bottom line, the unsecured small business loan will help you protect any assets associated with the business. That is because, even if something will go wrong, seizure is not possible. There are many other options to deal with the payment of this type of loan, and this offers a bigger confidence for your business.