Secured Business Loans A Good Option For Small Businesses
You may not want the risk, but consider all your options before you decide
If you are a small business owner, you know that at one point or another, you have needed extra cash. Maybe it was because you needed to expand your facilities, hire new help or even buy new equipment. Whatever the reason, extra cash could come in handy.
If you do own a small business, you may think that secured small business loans are out of your league. You may feel like you can’t risk your personal or business collateral in order to secure a loan. But on the flip side, an unsecured loan can come with high interest rates and tricky terms. So what’s best?
Let’s look at both options. A secured business loan requires collateral up front. This can be your assets, your home, your property, or your equipment. Collateral is important to lenders because it reduces their risk. Lenders know that if you default on your loan, collateral can make up their loss. And one benefit to getting a secured loan is that your interest rate will be lower.
Unsecured loans, on the other hand, carry much greater risk. With no collateral, the lender is taking a risk that you’ll be able to repay the loan - and if you don’t, the lender is basically up the creek without a paddle.
But what if you have a bad credit score? In this case, a secured loan may be the only option you are offered. It may also be the only way to get an interest rate you can handle. You’ll also be afforded a longer repayment period, which could prove useful if you have a tight budget.
A secured business loan can be used in a variety of ways. You can purchase a new and larger facility, or the property on which to build a new facility. You can pay for business expenses, buy new inventory, and even update your computer system.
As for unsecured business loans, the requirements are often more stringent. You may have difficulty obtaining an unsecured loan unless you have been in business at least a couple of years.
You can apply for secured business loans online, or in person at your bank, credit union or other lender. It pays to do your homework before you apply, however. Make sure you compare rates and terms. You don’t want to get yourself locked into something that you can’t handle, nor do you want to miss out on the best option out there for you, simply because you didn’t know about it.