Companies such as First American Merchant help businesses get the financing that they need. Sometimes, businesses to get the loans they need through collateral means. However, there are ways that you can secure a loan for your business without using collateral. Although collateral is standard in most business loans, there is always the downside of potentially losing your collateral if you cannot pay. Unsecured business loans are loans that don’t require you to put collateral at risk, and because of that, they are a great option for companies that aren’t willing to risk collateral to get financing. If you want to use an unsecured business loan to get financing, you’ll want to make sure that you know everything about the process. Here’s what you need to think about if you are considering applying for an unsecured business loan:
Avoid Losing Assets via Bankruptcy
Getting an unsecured business loan can help protect your business—you won’t be putting up assets that you could potentially lose in bankruptcy. Business loans don’t require collateral, so your home or another valuable asset you own won’t be at risk.
Get Cash Quicker
Unsecured business loans allow you to get your funding quicker, since you won’t need to have lenders appraise your assets. With the lack of paperwork, you can expect to receive your cash faster than you would with a traditional loan. For some business owners, this is a significant advantage, as getting the cash they need allows them to hit the ground running.
Loan Payments Are Larger, Loan Amounts are smaller
Now for the negatives—you should know that without any collateral backing you, your business loan is going to be significantly smaller. You probably won’t be able to get a huge cash amount, because the bank isn’t willing to take the risk. In addition, the loan payments you’ll need to make will be significantly larger on a per month basis.
Not Always Easy To Qualify
Without collateral, banks will want to see strong credit history and good cash flow. That isn’t always easy for relatively new companies. Startups in particular can have trouble getting qualified for an unsecured business loan.
May Need To Improve Your Credit Score
At the end of the day, you might need to improve your credit score in order to get qualified for an unsecured business loan. Depending on your financial situation, that could be relatively simple or it could be a difficult endeavor. Building good credit can take time, but you might have to start working on it if you want to get an unsecured business loan.