Borrowing money for your business is a big decision, and it’s always smart to consider all available options. To make the best choice, it’s important to know the difference between secured and unsecured loans.
Secured Loans
With a secured loan, the lender requires a form of security, such as inventory, property, or some other type of asset. If the borrower defaults on their loan, the lender will use this security to pay off any outstanding balance.
The approval process for secured loans tends to take longer than with an unsecured loan, and the borrower runs the risk of losing the assets they put up as security. However, secured loans offer lower interest rates and higher borrowing amounts, which can benefit a stable business.
Secured loans are best for more established businesses, which not only have assets to use as security but also have reliable cash flow. With a secured loan, proven business owners can build on what they’ve already accomplished and expand their customer base.
Unsecured Loans
Lenders make decisions about unsecured loans based on the borrower’s credit score and income, not by securing property or assets. The greater risk for lenders leads to higher interest rates, but borrowers usually get approval faster than with secured loans, which makes them ideal for smaller amounts.
If you’re just starting out, unsecured loans may be your best (and, in some cases, only) option. With an unsecured loan, you can borrow just what your business needs at that moment. After building steady cash flow and acquiring assets, you can apply for a secured loan with a better interest rate.
Ready to Get Started?
Still not sure about the best options for you? Contact Mortgage House today to speak with one of our representatives about business loan options. We can work with you to make sure that you’re borrowing exactly what you need to achieve your dreams.
