Pros and cons: Unsecured business loans

To start or expand a business, you may opt for third-party financing. The most common option they consider is a business loan, but what does that really offer? Let's list the pros and cons of obtaining an unsecured business loan.

Advantages:

No collateral - There are two types of business loans, secured and unsecured. Lenders of secured business loans require business owners to pledge collateral to obtain the loan together with their usual requirements. On the other hand, lenders of unsecured business loans just require the basic qualifications less the collateral.

Get funds fast - With unsecured business loans, the process is a lot simpler. This is because they usually require less documentation and with the collateral talks out the window, time is not spent appraising properties and assets.

Disadvantages:

Higher rates - Because of the higher risks associated with unsecured business loans, interest rates are higher compared to secured business loans. Higher interest rates mean higher monthly payments too.

Smaller loan amounts - Because of the higher risks involved, lenders are not as willing to approve bigger loan amounts compared to lenders who receive collateral as security.