In theory, unsecured business loans are the perfect finance options for many business owners. However, as enticing as no collateral requirements may seem, the word “unsecured” raises a red flag for some. A business loan is labeled “unsecured” if it is not leveraged by any assets as collateral. This is the key difference between unsecured and secured business loans. A “secured” business loan is a financing option backed by some form of collateral. For example, a business owner who obtains a secured business loan might leverage their car, home, or business as collateral. If a borrower fails to pay off a secured loan, their lender is given their client’s leveraged assets. This guarantees repayment for lenders, as they receive ownership of their clients property if they fail to pay off a loan in time. On the other hand, unsecured business loans are not backed by collateral, but instead rely on the creditworthiness of the borrower. While credit scores do play a factor in qualifying for unsecured loans, there are many alternative financing options that prove as exceptions.
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Disclaimer: The information and insights in this video are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the speakers. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions or mistakes.