Businesses often utilize credit products such as business loans, for various reasons. In the past few years, unsecured business loans, or business loans with no collaterals are seeing a steady growth in demand across many markets. Even through the tougher times, many unsecured business loan offerings witnessed a rise in demand. Today, we discuss the top pros and cons – or the benefits and limitations – that such business loans feature, so that if you’re planning to apply for a business loan, you have a better understanding of these aspects.
What is an Unsecured Business Loan?
An unsecured business loan is a business credit offer in which a loan amount is given to the borrowing business without the pledging of a valued collateral or asset. In such a loan, should there be a situation where the business is unable to repay the loan, the lender does not have the right to seize any business assets from the borrowing business. Loans from alternative business lenders are typically unsecured loans.
1. No Need for Identifying and Evaluating Assets
When you apply for a traditional business loan that requires your business to pledge an asset, one of the first things you may need to do is, to identify suitable and valuable assets and determine their value along with suitable evidence to support the claim. Apart from being a time-taking task, there can be situations where this also costs money.
2. Limited Risks
With no valued assets being pledged, a loan has limited risks. If you’re unable to repay an unsecured business loan, a lender may have to wait for your business to be in a position to make repayments or in a more extreme situation, would have to use legal procedures which can provide you more time and reasonable options of repayment.
Of course, by not pledging assets, you don’t end up losing any, should you be unable to repay.
3. Ease of Application and Qualification
Typically, alternate business lenders offering loans have easier loan application processes and they keep simpler qualification requirements.
4. Quicker Loan Processing
Apart from simpler application and qualification, the loan process in itself is also often simpler when you deal with an alternative business lender. To add to this, eliminating a process of asset selection and evaluation makes the entire loan process a quick and simple one.
1. Higher Interest Rates
Typically, unsecured business loans are considered higher risk loans. With higher risk being associated, come higher fees and rates of interest, making such loans more expensive at an average.
2. Limited Loan Tenures
Most unsecured business loans would have tenures limited to a year or two. Secured business loans tend to offer significantly longer repayment tenures.
3. Limited Loan Amounts
If you’re looking for a large business loan (i.e. above $500,000), there is very little likelihood that such a loan would be an unsecured one, unless you run a business that’s likely to be listed in the Fortune 500 soon!
Apply Online for an Unsecured Business Loan
We at Business Advance Lenders take pride in being a renowned name amongst the alternative business lenders. Our services are fully available online and with us, you can get an unsecured business loan that’s easy to apply for and quick to get approved and disbursed. You can simply provide us your contact details filling in the form on this page or hit the “Apply Now” button and our team shall soon be in touch with you, working on a loan to suit the needs of your business.