Top 5 Major Benefits of Opting for Unsecured (No Collateral) Business Loans

If you’re looking for funds to jumpstart your business, you may be interested in an unsecured business loan. These loans tend to be easier to qualify for, making them a great option for startup business financing. Here are a few reasons why many small businesses are turning to unsecured business loans as a source of easy startup funding.

What Is An Unsecured Business Loan?

An unsecured loan is pretty much exactly what is sounds like: a type of loan you can obtain without needing to use any of your assets as collateral. [1]

The way that many business loans work is that you will need to place assets as collateral with your lender in case your business goes badly and you are unable to pay back the loan in full at the agreed upon time. If you have a secured loan, then the loaner may be able to recoup some of their money by targeting the assets you secured on your loan deal.

You can now see the benefit of an unsecured loan: if you do not have assets listed as collateral, then your risk exposure is much smaller. This is the beauty of unsecured business loans!

Top 5 Reasons To Opt For An Unsecured Business Loan

There are many different reasons a business would opt for an unsecured loan. The key is finding what fits your needs. Here are some of the primary reasons to consider unsecured loans:

1) Provide Working Capital

The primary benefit of securing ANY type of loan is to get additional funds for your business. Obtaining an unsecured loan will give you the flexibility to both continue daily operations as well as maybe even expand into new projects.

2) Helps Build Credit For Your Business

Another benefit to obtaining a loan is that you will help build credit for your business. This could be important if you are planning new projects in the future, but aren’t sure you will be able to secure the required funds to truly develop it. By starting your credit history now with an unsecured loan, you can start to build up that relationship with lenders so that they will have more confidence in your ability to repay moving forward.

3) Less Risk For The Borrower

As mentioned earlier, one of the major benefits to unsecured business loans is that you won’t have to risk your collateral assets. All you need to worry about is the actual amount of the loan, rather than what assets you might lose on the back end if you are unable to meet payments on time for whatever reason. Depending on your situation, this could be absolutely crucial to the survival of your business.

4) Short Application Process

No matter where you are seeking the loan – be it a financial institution or a private lender – they will want to make sure that you have the ability to pay back the loan. The benefit on an unsecured loan is that they won’t have to spend as much time evaluating your assets that would otherwise be used as collateral. This can help speed up the application process.

5) Develop A Strong Relationship With Lenders

Depending on your future business plans, you may want to develop a deeper relationship with your lenders. Generally, they will only offer unsecured loans if you already have a good working relationship with them or if you have the type of business plan that they have confidence in. Starting your relationship with the lenders now will ensure you have a strong line of communication for future projects.

Conclusion

As you can see, there are many benefits that come with unsecured business loans. The key is to understand your options so that you can find the best fit for your business needs. With any important financial decision such as securing a loan, we recommend that you do some research beforehand and evaluate the pros and cons. This will help set you up for success with this loan and any that may come in the future~

References

“Unsecured Loan” BDC (2022). Retrieved May 25, 2022 from: https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/unsecured-loan
Why Unsecured Business Loan Is A Better Option For Small Businesses“ HeroFin Corp (2022). Retrieved May 25, 2022 from: https://www.herofincorp.com/blog/why-unsecured-business-loan-is-a-better-option-for-small-businesses
“What Are the Top Pros and Cons of Unsecured Business Loans?” ForaFinancial (2022). Retrieved May 25, 2022 from: https://www.google.com/search?q=why+get+na+unsecured+business+loanm&rlz=1C1CHBF_enCA909CA909&oq=why+get+na+unsecured+business+loanm&aqs=chrome..69i57j33i10i160l4.3833j0j7&sourceid=chrome&ie=UTF-8