Secured and unsecured business loans compared

If you are looking for funding for your business, you may have come across the term secured and unsecured business loans. If you are still weighing your options about which one you should avail, let me help you compare them and decide which suits your business the best.

As you know by now, there are a lot of funding options available for small businesses but the usual or let say, most popular, are still secured and unsecured business loans. But what sets them apart from other than being secured and unsecured, let's discuss!

To start, it is given that one of the differences between the two is being a secured and unsecured type of a business loan but what does that mean? A secured business loan requires the borrower to present collateral to give the lender a way to recoup their losses if the business defaults. However, that's not the case for unsecured business loans. An unsecured business loan is granted without the need for collateral for security. The lender judges the business's capacity to repay by looking at credit rating and financial strength of the business.

Another difference is access to capital. Secured business loans typically have access to higher capital as opposed to unsecured loans. It's also known that unsecured business loans tend to have higher rates and fees compared to secured business loans.