Unsecured Small Business Loans
In everyday language, an unsecured small business loan is a loan provided to small business owners without any collateral such as real estate or investment properties like a parcel of land or a house. In this agreement, the borrower agrees to pay back the lender within a given set of terms and period and usually just signs several documents that outline these terms. Hence, any unsecured loans can be referred to as a signature loan. The simplest way to explain an unsecured sb loan is when an entrepreneur borrows money from a friend or family to help fund his small business. The borrower simply signs an I.O.U. as a documented form of agreement to payback whatever amount is borrowed.
Small businesses would need a steady and adequate flow of money to stay afloat and grow in the market. Since small businesses would usually have limited resources, business owners would often resort to some form of financing at one point or another. An unsecured sb loan is a type of financing which does not require business owners to put up for collateral their business properties such as inventory or equipment. With the higher risk of delayed or non – payment of loans, lenders would usually give much higher interest rates for these loans as compared with secured ones.
Another precautionary measure taken by lenders is to run a credit check for any borrower applying for a loan. To get approval for an unsecured sb loan, the owner or owners, should have a good credit record, and has no history of delinquent credit payments to a lending institution. This requirement may be particularly difficult for companies that have just started out and have not established themselves yet as credible borrowers.
If you are looking for an unsecured financing option for your small business, you may want to check the rates offered by your local credit union.