These loans are more likely to be approved than secured business loans i.e. collateral backed loans. As there is no collateral to evaluate, you are also likely to get the funding you need in a more timely manner.
An unsecured loan carries the added benefit that if you are unable to repay the loan or if you go out of business, the lender cannot claim any assets.
This type of basic unsecured consumer loan is essentially a debt consolidation loan (referring to the debt from your various credit cards). Now that they’re paid off, your credit score goes up. As you repay the loan over time, you’re building a stronger credit history. Once you’ve paid it in full, your credit goes up even more.
Next you decide to replace your three high interest cards with one low-interest simple credit card – no rewards and nothing fancy. You use an online credit card comparison chart you found here on Goalry and apply for the card that best suits your lifestyle and goals. Because your credit has improved from what it was before that debt consolidation loan, you’re offered even better terms than you expected.
These loans also allow you more flexibility as a business. In a secured loan, you must hold onto any assets that are used as collateral. As an example, consider a business which has put up one of its warehouses as collateral. They later consolidate their goods and find that they need much less room. However, as long as the loan is in effect, they cannot sell the excess property that is costing money without providing benefit.
If that’s you, you’re half-right about some of it. If you have good credit, for example, that should help you no matter where you shop for a loan (just like poor credit will impact you everywhere as well). That doesn’t mean the impact will be the same from lender to lender, however. And yes, most interest rates companies set are indexed to a “national something-or-other.” That doesn’t mean they’re all the same, or that lenders don’t have great discretion what terms they actually offer you. As to lenders fighting over you, we doubt they’ll come to blows or pace off to the count of ten.
But more of them want your business than you might think. Even if your credit score is average or below average, online loan companies want the chance to win your business. They don’t make money if they don’t make loans. You’re a potential customer. Give yourself some credit, and maybe they will, too.
Are There Drawbacks to Unsecured Small Business Loans?
As with any business funding option, there are both possible pros and cons to consider. An unsecured business loan typically will have a higher interest rate than a comparable secured loan. This is because the lender is taking on a greater degree of risk than they would with a secured business loan.
Most importantly, the impact of a little personal loan shopping when you’re considering doing some debt consolidation, or business loan shopping when you’re working out how to finance a business, or even mortgage loan shopping when you’ve found “the” home for yourself and your family, is cumulative. In other words, the positive impact of taking the time to find a loan instead of accepting the first thing that comes along gets bigger and better each time you move another step forward.
When used carefully, unsecured small business loans can allow your business to launch new marketing campaigns, expand into new profit centers, and physically grow into new offices when the old ones no longer hold a growing staff. By putting these extra funds to good use, the short-term infusion of cash from a small business loan can help you make your business thrive.