Perhaps you need to expand your business or add additional manufacturing capacity. To do so, you might be considering pursuing an unsecured business loan. Unsecured business loans can be extremely attractive options for business owners who wish to secure a little extra cash for important investments without risking any of their existing assets.
However, unsecured business loans come with several benefits and drawbacks that should be equally considered.
Here are some of the pros and cons that you should take into account when applying for an unsecured business loan for your business:
- With an unsecured business loan, no collateral is required. This means that none of your assets, such as equipment or property, will be in danger of being repossessed if you default on the loan. It can also be a good idea to use an unsecured business loan to avoid having to put up collateral that you don’t have, particularly if you are a small business.
- Unsecured business loans tend to enjoy a faster approval process. Secured loans tend to take longer because the appraisal of the collateral can slow things down significantly.
- An unsecured business line is beneficial in that it can be used to fund a wide range of business activities. It is a highly flexible type of financing that can be used to cover anything from marketing and advertising costs to equipment purchases.
- Unsecured business loans might protect your other assets from seizure, but they do tend to come with higher interest rates. As an unsecured loan, the financing is a bigger risk for the lender than a secured loan, which therefore means that your interest rates MAY will be higher. For this reason, an unsecured business loan can end up costing you more in the long run as you pay it off over time.
- Another downside to unsecured business loans is that the eligibility requirements tend to be more strict. This means you will need a strong credit history and a good credit score to ensure that you are able to repay the loan because the entire financing is predicated on your ability to do so. If it appears that you may not be in a position to repay the loan on time, the lender might well refuse the loan entirely.
- Owing to the higher risk for the lender in unsecured business loans, they tend to hand out smaller loan amounts than one might get with a secured business loan. If the smaller amount is all that you need, then this kind of financing should be the ideal option for your business.
It is important to do your research and compare loan options, which is where we at iCREDIT come in. We can help you apply for unsecured business loans today. Contact us now for more assistance!