subject: Small Business Loan: Secured Or Unsecured? [print this page] Small Business Loan: Secured Or Unsecured?
To get a small business loan, you will have to have good credit to be able to get a lower interest rate, just as if you were trying to get a loan for a large business loan. It is a good idea before getting a small business loan to do whatever you can to improve your credit the most you possibly can because the better credit you have, the better interest rate you will be able to get, and therefore, you will be able to save a ton of money, not to mention, making the loan a lot more affordable, and being able to use the extra money saved toward your business.
To get a small business loan, it may be easier to try for a secured loan rather than an unsecured loan because the smaller the loan, the less valued your assets have to be. To get a secured loan, you would have to offer assets that are decided beforehand and that are worth as much as the loan amount. You would need to hand over those assets to the lenders if you were not able to pay back the loan. With secured loans however, you generally get a lower interest rate than with unsecured loans. So, if you are able to pay the loan, it will save you a lot of money in interest!
With unsecured loans, lenders only have your legal word that you will pay them back, so they try to protect themselves more through higher interest rates in case you do no pay back the full amount of the loan. Interest also may continue to accumulate if you do not pay the full amount of the loan back. Therefore, secured loans have many advantages, although you do run the risk of losing assets, so make sure they are assets you are willing to lose in case you are not able to pay back the loan.
It is also a good idea when trying to get a business loan, no matter how small it is, that you have a detailed business plan in mind that you are ready to discuss with the lenders since they will need to know. They will make decisions based on your business plan about whether they think the business will grow or fail.
