Imagine yourself putting up a small business with your hard-earned money. You put in a lot of time and effort into marketing and branding your business. Then suddenly, your business explodes with a lot of incoming orders that your existing inventory and production cannot fulfill all the incoming orders. You need to expand your business immediately.
However, to do that, you will need additional capital that you do not have. What would you do?
If this happens to you, then you are not alone. There are entrepreneurs that want to start a new business or expand an existing one without enough additional capital.
There are two options to choose from to face such instances. Getting a secured loan from banks or sourcing unsecured business loans.
Many people believe that the best way to get more capital for your business is by applying a secured loan from banks since they offer lower interest rates. However, you should know that the lower interest rates for the loan are in exchange for you giving the bank collateral.
Collateral are properties and assets that you own which the bank will hold on to for security until you have entirely paid up your loan. Although you only pay for lower interest rates with a secured loan, you will have the risk of losing your properties when you fail to make your payments on time.
Unsecured Business Loans
Fortunately, there are some banks and third-party lenders that can offer you the additional capital which you need to expand your business through unsecured business loans.
Here are the advantages of getting unsecured business loans for your business needs.
1- No Collateral
You will not need to worry about losing any of your property since unsecured business loans will not require collateral. However, because the bank or lender will not hold on to any of your assets, the interest rates that they give for unsecured business loans are higher than that of secured loans.
2- Quick Approval Time
The approval time for unsecured business loans is very short. If you have all the requirements, your loan may be approved within a 24-hour time period. If the need for your business expansion capital is immediate, then getting this type of loan is perfect for your needs.
3- Shorter Term Periods
One advantage of unsecured business loans is that they only approve loans for shorter-term periods. It will then be easier for you because you only need a shorter time to clear out your loan balance.
Most unsecured loan providers do not require you to pay extra fees for early settlement of the loan amount. This means that if your business gets enough money to clear out the remaining balance of your loan, then you can immediately settle the amount without being penalized.
4- No Restrictions on Loan Purposes
Banks offering secured loans will usually ask you the purpose of the loan. With unsecured business loans, the lenders will not bother you with scrutinizing the details of where you are going to invest the additional money.
5- Credit Rating
Although you can get unsecured business loans without having a good credit score, the amount of loan that you will get will still be dependent on your financial situation, such as your monthly income and your ability to make payments regularly.
If your only option to expand your business is through unsecured business loans, make sure that you are going to use the loan for increasing the working capital of your business to fulfill all incoming orders.