A business loan, without a shred of doubt, is one of the more resourceful financial assets for enterprises. But then, a lot of misinformation seems to have already flooded the market, when it comes to the types of loans and lending schemes. While there can be a wide range of business loans, both private-funded and government-backed, broader segregation involves viewing each, either as a secured or an unsecured loan.
Over the course of this discussion, we shall take some time out to discuss secured and unsecured loans, whilst enlisting the differences between each.
Loan Type
You can readily ascertain the differences between secured and unsecured business loans, simply by closely analyzing the names. Secured loans are offered by lenders when the borrower offers something in return, as a security against the sum. However, an unsecured business loan doesn’t require anything in return and is offered by the lender upon considering the existing cash flow of the business, the credit score of the owner, and other factors.
Interest Rates
Financial institutions charge varied interest rates on different business loans, depending on the credit profile, repayment history, and other factors. However, as far as the general rule of thumb is concerned, interest rates on secured business loans are lower than the ones levied on the unsecured ones, as you are already handing over collateral to minimize the risk profile of your loan.
Estimates
The ceiling for a secured loan is usually determined by the cumulative value of the concerned asset. Therefore, it is important to have a correct measure of the worth as the financial institution might still cross-check the same. However, for unsecured loans, the ceiling is determined by the lender, depending on the credibility of your business.
Loan Availability
Secured loans are easy to get as you aren’t actually putting the lender’s finances at risk. However, if your creditworthiness is on the questionable lines, an unsecured business loan might be exceedingly difficult to procure.
Loan Term
Unsecured business loans have shorter repayment tenures, as the financial institutes would want their money back, as soon as possible. In the case of secured loans though, the repayment period can be easily extended to even 20 years, depending on the term loan amount you seek.
Pre-Requisites
The only thing you need for getting your hands on an unsecured loan is an excellent credit score. For a secured business credit line though, it all comes down to the credit history.
Tax Benefits
While you cannot get any tax benefit on unsecured credit lines, secured business loans often offer the flexibility of getting the interest amount written-off at times, provided you have mortgaged the primary home as collateral.
Final Words
Regardless of which business loan you choose, you can find the one at the Finserv MARKETS, depending on your interest-specific needs, existing assets that are to be collateralized, and even the credit score.
