An unsecured loan is different from other regular forms of credit and financing available to a business. For young businesses or ones that operate via cashflow and hold few physical assets, they might well be the only good option to raise capital for business expansion.
Here are 4 benefits of taking out an unsecured business loan.
Business Owners Don’t Need to Give Up Ownership
One of the concerns with seeking capital for business operations and expansion is the need to give up equity in the business. Founders wish to keep ownership in-house and not sell it off piecemeal to silent partners if this can be avoided. That’s especially the case when only wanting a relatively small sum to spur early growth.
Lenders like Lending Express (now known as Become) don’t require an ownership stake when issuing an unsecured business loan. This removes one of the hurdles for business owners concerned about losing too much equity early in the life of the business.
Not Secured Against Important Assets Needed for Continued Operations
For companies that use certain equipment while operating the business, pledging those assets as collateral for a loan risks the continuation of the business should they hit a short-term trading slowdown. Losing access to key assets of the business such as computing equipment or industrial machinery and lacking funds to repurchase alternatives effectively puts the company out of business unless it can find new investors quickly.
Fortunately, an unsecured business loan doesn’t require assets to be pledged which provides peace of mind for the owners of the business.
Quick to Arrange
If the business has a history of good credit, without needing to verify asset ownership and the valuation of said assets, then unsecured loans for businesses are issued faster than their secured loan counterparts.
The paperwork and approval process are faster to put together and easier to get rubber-stamped. For businesses needing prompt issuance of funds, unsecured loans have far more to recommend them.
Doesn’t Require Extensive Assets to Qualify
One thing that prevents more applicants for secured business loans is the need to put up collateral in the form of existing assets. This could be anything from the lease on the office building to shares owned to existing stock in the warehouse. Each lender has a different list of acceptable asset types that can be posted as security for a business loan.
Secured business loans make lenders feel safer because should the business go under, they are likely to get paid out first; unsecured loans are less likely to be discharged. In other words, typically, secured lenders get repaid through bankruptcy proceedings ahead of unsecured lenders.
Unsecured business loans are quicker to arrange, require less paperwork, and no pledge of company assets. For business owners looking for short to medium-term working capital or funds to expand optimistically into a new market, the faster issuance of an unsecured loan allows them to move with haste while their competition is still making detailed plans. The added operational flexibility this offers is not to be discounted in fast-moving markets.