Understanding the Difference between Secured and Unsecured Business Loans
One of the initial dilemmas that most business owners face when applying for a loan is this; ‘what kind of loan should I get for my business requirements?’ Choosing appropriate business loans is easier said than done, especially if it is your first time, as there are multiple factors to consider. You need to understand the range of your needs followed by clarity on the kind of loan that would best fulfil those needs. If you are not sure about the loan to apply for, then we are here to help. Given under is a comparisionof the most common business loans; secured and unsecured business loans. Secured Business Loans Secured business loans are loans that are backed by a security, also known as collateral. When applying for secured loans the business owner would put an asset as a security against the loan amount. This kind of loan is favoured by new businesses, startups, businesses with past bad credit, businesses with weak financial strength and even businesses looking for higher loan amount. These loans are also commonly known as “Caveat loans” Eligibility Should have an active ABN Have an asset (owned by the borrower) which can be provided as a collateral or security.
A new business without a trading history can get the loan, provided they get in touch with an expert finance broker, who can facilitate a secured business loan from a private lender. Secured business loans can be used for starting a new business, business expansion, buying commercial real estate, meet the working capital needs, buying stocks, inventory, equipment, paying wages and tax dues, marketing and advertising, business premises renovation, and more. Unsecured Business Loans Unsecured business loans are widely favoured by SMEs and new businesses with a minimal trading time and absence of any security or collateral. You can get an unsecured business loan without putting an asset as collateral. The loan is approved and dispensed by the lender post-assessment of the credit score of the borrower and the overall cash flow of the business. Eligibility Minimum monthly revenue of $5000. Active ABN of the business. Proof of active trading going back at least 6 months. Unsecured business loans can be used for a new venture, business expansion, to buy real estate, to acquire funds for capital, to purchase equipment and stocks, to pay wages or rent, to pay any tax dues, for advertising and marketing, etc. Secured Business Loans VS Unsecured Business Loans SECURED BUSINESS LOANS UNSECURED BUSINESS LOANS 1. Asset as collateral 1. No asset, hence no risk of losing it as 2. Loan amount would vary as per the collateral. asset value. 2. Ability to obtain up to $500,000 . 3. Risk for borrowers to loose asset.. 3. These are more riskier loans for lenders. 4. Short-term loans.
Conclusion Whether you are applying for secured or unsecured business loans, it all boils down to the finance broker and their expertise to get you access to fast funding with flexible loan terms. So, be wise in your choice of a finance broker with a strong network of lenders, knowledge and market reliability.