What is the difference between secured and unsecured business loans?

What is the difference between secured and unsecured business loans?

Business Finance, News

Considering the differences between a secured and an unsecured business loan can be vital for boosting the finances of your small business. Understanding these differences will enable you to make the best choice for your financial situation and implement successful business growth.

Secured business loans

A secured business loan is money that is borrowed and ‘secured’ by some valuable assets belonging to your business. These assets can be vehicles, machinery and even commercial property. Secured business loans can also be obtained by a company director willing to put forward their private residential property. Another way to obtain a secured business loan is through invoice finance, which relates to the number of invoices that your business has raised.

Advantages of secured business loans

The biggest advantages of a secured business loan are the significantly smaller risk on the lender’s side and the fact that you can borrow a larger amount of money to boost your business growth. There is a lot of flexibility associated with secured business loans, and the period of repayment can be extended.

Unsecured business loans

Unlike a secured business loan, an unsecured business loan is not secured by any valuable assets that belong to your business. As this loan is unsecured, there is a higher risk for the lender as there is no solid guarantee that the money will be repaid. Because of the risk involved, the amount of loan is usually limited. The trading position of your business traditionally supports your unsecured business loan, as the past success and profits of your business are used to determine the amount of loan you are likely to be able to borrow.

Advantages of unsecured business loans

There are many advantages of choosing an unsecured business loan, including the fact that all of your business assets are freed and not facing any risk towards them. There is also a simpler application process without any upfront costs.

For financial advice about which kind of loan is most beneficial for your business growth, or for general business advice, contact our team today at Tower Leasing via our website.

Image by: ccfb via Pixabay

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