Are you interested in unsecured funding for your business? You are not alone. This is something that both new and established businesses can benefit from. Before you choose this type of funding, though, you must consider the pros and cons. Although unsecured funding has become very popular, it does not mean it is your only option.
In this case, the word “unsecured” means that no collateral is required. This is the opposite of a secured loan in which you must put up collateral, such as real estate, in order to be approved.
Unsecured Loans are a Popular Choice
There are many reasons why unsecured funding has become a popular choice among many businesses. As noted above, and oftentimes the biggest benefit, no collateral is required. This takes some of the risks out of the borrowing process.
Additionally, unsecured funding can be used for a variety of expenses. As long as it relates to your business, you can use the money any way you see fit. This includes: purchasing real estate, expanding your current space, remodeling, marketing, advertising, and the purchase of equipment.
Since you are not using any collateral, you can expect the lender to attach a higher interest rate to your loan. In short, this means you will pay more on a monthly basis as well as over the course of your loan. This is one of the trade-offs you must be comfortable with if you are going to opt for unsecured funding instead of a secured loan.
There are hundreds upon hundreds of financial institutions that offer unsecured funding.
It is important to compare the terms and conditions of several banks. Also, ask questions that could make your decision easier:
- What is the term of the loan?
- How much interest will I pay over the life of the loan?
- Is there a prepayment penalty?
With the right funding, you can start up your business and get on the right track from day one. Although there are many types of funding to consider, unsecured loans are gaining popularity.
There are many benefits of unsecured funding, many of which may be perfect for the type of business you are starting or currently involved with.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.