3 Good Reason to Get Unsecured Small Business Loans

3 Good Reason to Get Unsecured Small Business Loans

In today's article we will be discussing a very specific loan type that may or not be appropriate for your circumstances and your company. Hopefully by the end of this guide you will understand what unsecured small business loans are and how they can be used. We will give three examples of how and why to use them as well.

First to the definition: unsecured loans are unsecured because they do not have collateral backing them directly. A car loan or a home loan are both secured loans because the car or the home backs the loan. If you do not make repayment as agreed, the bank can take back their property and either resell it to a new borrower on credit, or sell it on auction to try to recapture some of their losses. Additionally, small business loans have the limitations and requirements of small businesses in mind, they are designed for companies with modest revenue and perhaps without a large established amount of business history.

One reason you might get a loan of this type is to buy equipment from multiple vendors, it may not be possible to get a secured loan in this situation as there are different vendors involved that each have claim to their own equipment, and it would be needlessly complicated as well. You could use unsecured small business loans to roll this wide spread need for new equipment into one loan payment.

Another reason is that certain times of emergencies or financial downturns may be appropriate for an unsecured loan of this type. This is very circumstantial however. There is one fundamental question you must ask. If I borrow this money, what will I do with it to make my business run more successfully? If you don't have a clear plan to make your loan work for you, chances are you shouldn't get a loan. If you know precisely how you will use the money to turn things around for your company and bring it back in the black, than you should use the loan to revive your company.

Finally, if you have a sudden surge in business that results in the need to bring in a large inventory of supplies to be resold over the next month or months, you may need unsecured small business loans to cover the temporary surge in your operating expense. You can fairly anticipate that you will have the ability to repay the loan + interest out of the revenue and profits you make from the sale of these supplies. This would be an excellent reason to seek out a loan.

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