When you want to take out a loan for your start-up business but don’t have the collateral to spare, unsecured loans can help. These loans help those with good credit get their foot in the door and make it possible to acquire funding regardless of whether you have additional assets. But before you consider taking one out, you must understand a few of the pros and cons of unsecured business loans. Here is what you need to know.
Pros of Unsecured Business Loans
There are several noteworthy benefits of an unsecured business loan. They’ve helped millions of companies begin operations and get their revenue flowing. These are a few of those advantages.
They Help Build Your Credit
First and foremost, these loans help establish and build company credit as long as you make on-time payments. Should you ever need to take out a loan in the future for your business, you must have a history of credit trustworthiness when it comes to paying back your debts. Lenders check your repayment history and credit when determining whether to provide you with a loan. Starting small with an unsecured loan and paying it back on time can significantly impact your lending ability later.
Little to No Collateral Needed To Apply
Additionally, as we’ve stated previously, unsecured business loans require little to no asset collateral. Instead, these lenders look at bank statements, credit card payments, and business plans to determine the reliability of a recipient. Therefore, you won’t need to worry about collateral repossession should you fail to pay.
Quick To Apply and Receive Your Loan
Unsecured loans are also straightforward and quick to apply for. Since there’s no collateral to assess for value, you get to skip a significant part of the traditional loan process. As such, it’s much faster for lenders to view the rest of your credit history and identify whether you are a good fit for the loan. Depending on how busy your lender is, you may receive your loan in as little as 24 to 48 hours.
Cons of Unsecured Business Loans
While unsecured loans are incredibly advantageous for many individuals, it’s still important to consider some cons. These are some potential drawbacks to keep in mind.
Reduced Loan Amounts
For one, because unsecured loans don’t involve collateral, the overall loan amount tends to be much lower. They may not be the right choice for you, depending on how much you need to get your business off the ground. However, they’re more than sufficient for many business types.
Raised Interest Rates on Repayment
You will also experience higher interest rates on the loan you receive. Since these loans come with a raised amount of risk for lenders, they often seek a faster return on their investment. So, it’s essential to prepare yourself for this.
Now that you know three pros and two cons of unsecured business loans, you should consider taking one out yourself. Pango Financial offers a variety of private start-up business loans to get your company on its feet; we are ready to invest in your venture.