A Brief Insight on Secured Commercial Loans and Unsecured Business Loans

A Brief Insight on Secured Commercial Loans and Unsecured Business Loans

If you are thinking of starting up a new business or you are looking to expand an already successful corporate enterprise, the chances are that you will get absolutely nowhere and at light speed if you do not have access to the required type of financing you need.

When trying to source suitable commercial finance products, an applicant will typically achieve funding by means of at least one, but sometimes multiple, business loan(s). When the time arrives, the borrower will ultimately be required to decide whether to apply for a secured business loan or an unsecured commercial loan product.

With this in mind, we need to understand the main differences between these two types of finance so that we can make an informed decision and take the most logical route.

What are secured loans for businesses?

A secured business loan is a long-term borrowing product that is available exclusively to applicants who are able to offer some type of collateral as security against the sum being borrowed. In most cases, this type of financing is usually secured on a property or suitable commercial assets. Although the borrower will typically use a commercially owned building or business asset as security, there are cases where secured business loans are taken out against an applicant’s home or primary residence.

Provided you are entirely certain that you can pay the loan back on time and in line with the terms and conditions set out in the agreement, a secured loan is often the most affordable type of financing available to the modern business borrower. As the loan is secured against an appropriate property or business asset, the rate of approval is generally exceptionally high, and your personal credit history and company finances will not be scrutinised as they would normally be when applying for an unsecured borrowing product.

Secured business loans are usually paid out at quite a fast pace, and the application process itself is incredibly quick and simple to understand. Of course, there is a downside to all of this, which is the fact that your assets will be removed from your possession and sold on to a third party should you find yourself unable or unwilling to make the required repayments in a frequent and punctual manner.

What is an unsecured business loan?

Unsecured business or commercial loans are short- to mid-term borrowing products that are not secured against an applicant’s assets. The main benefit on offer here is that if you are unable to pay an unsecured debt, you will not lose your home or valued assets as a direct result. However, with an unsecured loan, you won’t be able to borrow anywhere near as much as you could if you secure the funds against something of value. The application process is also a lot less forgiving, with much tighter restrictions, and you will also find that the interest rates can be quite high if you are successful in terms of accessing the funds you need to help your business grow and progress to the next stage.