unsecured business loans

Unsecured Business Loans: A Smart Choice to Consider

Whether you are thinking of starting a new  business or expanding one, unsecured business loans would be a smart choice to consider. As we all agree, funding is one of the most critical drivers for any business to thrive. Luckily for entrepreneurs, the year 2016 comes with a healthy competition between the traditional banks and online financial institutions. This means alternative finance could make lending rates be lower than earlier years.

As entrepreneurs and startup businesses emerge, demand for loans is also at its peak. Small business finance has never been easier with the establishment of institutions like Kabbage, RapidAdvance, Accion and many other non-traditional financial institutions. Small business loan rates have declined considerably as non-traditional banks become engaged with startup projects in providing business capital. These third-party financial businesses, provide secured loans and unsecured business loans options.

Annual estimation at the end of 2015 shows, that average national loan rates in the United States on unsecured business loans were much higher compared to rates on secured business loans. This is usually the case with unsecured business loans since it is not backed by collateral.

What is Unsecured Business Loan?

One of the fast business loans alternatives is the unsecured business loan. The unsecured business loans option are funding that are given and supported by the borrower’s creditworthiness, rather than any type of collateral or property.

Borrowers should generally have very high credit ratings, and in turn, are approved a line of credit. They are also called signature loans or personal loans. Acquiring a credit card is a good example.The fact that unsecured business  loans are not backed by collateral, suggests lenders take risks in granting them. Therefore, interest rates in some cases could be high. As the sole proprietor of a business, an unsecured business loan is an easy option to consider. In other cases, the interest rates on unsecured business loans have a fixed APR.

When to consider Unsecured Business Loans

If you have recently been planning to start a new business or have an idea to expand an already an existing business, then considering the third-party loan could be a good idea for you.

Working capital loans which are not backed by collateral, has increased the rate of startup projects and has improved business expansions. Unsecured loans continue to improve business finance solutions. It has become an alternative for business startup loans for entrepreneurs who do not have collateral in obtaining funding for their businesses. Business ideas should always be kept alive! Funding them without collateral is also great but have its negatives and positives.

Advantages of Unsecured Business Loans

  • For the most part, obtaining  unsecured business loans are easier than others, as it does not need collateral security.
  • Lenders can’t seize any of your business property.
  • If you have acquired an unsecured business loan, but business is not going as planned, you could file for bankruptcy. The court most likely will relieve you from paying back the loan.

Disadvantages of Unsecured Business Loans

  • Unsecured business loans have higher interest rates than secured loans.
  • It is difficult to acquire an unsecured business loan if you don’t have good credit.
If your business startup will rely on unsecured business loans for funding, any type of default could affect the credit ratings of your business. It is therefore, very important to keep track of payments as a positive way to improve your credit worthiness.

Editorial Staff at CEIimages is a team of writers, dedicated to the development of individuals to achieve their maximum potential, led by Enoch Antwi. Follow us on Google+. View all posts by

Leave a Reply