Starting or running your very own business can be very hard and stressful, not to mention the capital you need to get things going. But luckily there’s a way for you to start your business even if you don’t have the money to do so and that is by applying for secured business loans.
What Are Secured Business Loans?
There are two kinds of business loans – unsecured and secured business loans. Unlike unsecured business loans, secured business loans require the borrower to give the lender collateral. This is why a lot of lenders and financial institutions highly favor secured business loans rather than unsecured business loans.
What about Unsecured Business loans?
Another type of business loan is the unsecured business loans. Unlike secured business loans, unsecured business loans require no collateral and are approved.
The Other Types of Business Loans
Now there are other types of business loans aside from unsecured and secured business loans. Here are some of the most prominent types of business loans:
Term loans
Term business loan is one of the most typical types of business loan. The money loaned is usually used for working capitals, acquisitions, company expansions.
Equipment Loans
Equipment loan can be considered as secured business loans since the equipment you buy acts as the collateral
Lines of Credit
This type of business loan is generally used to protect against cash-flow difficulties. The money is withdrawn only if required. Lines of credit should be paid quickly and only be used for short term needs since the interest rate is very high.
Seasonal/Working Capital Loans
Seasonal or working capital loans are paid back at the end of the borrowing cycle. This type of business loan is usually considered unsecured business loans but they can become secured business loans.
The Advantages and Disadvantages of Secured Business Loans
Applying for secured business loans can have a lot of advantages as well as disadvantages. Here, we will be discussing what those advantages and disadvantages are.
Pros
- As stated earlier, secured business loans require you to give collateral to the lender. This makes it less risky for the lenders and in turn makes it more favored than unsecured business loans
- Another advantage of getting secured business loans is that you have a lot more options on deciding the terms for repayment. You can even a 30 year repayment term
- You can also negotiate for better interest rates
- Since secured business loans are more favored than unsecured business loans, they are less expensive when it comes to interest rates
- Secured business loans are also approved a lot faster than non-secured business loans
- You can even apply for secured business loans even if you have bad credit
- With the given collateral, secured business loans give the borrower the much needed flexibility of the repayment methods
Cons
- The collateral itself is probably the only main disadvantage of secured business loans
- There are some events that can make you miss payments such as bankruptcy or any kind violation on the obligations of the loan documents
- If you apply for secured business loans against bad credit you tend to get higher interest rates
Is there any alternative to secured and unsecured business loans?
Online business lenders like these just review your credit history, the repayment capacity and the number of years you’ve been operating your business, in order to grant you instant same-day business funding. To learn more about this type of funding, please refer to this site.
