Your business may require funding at various stages and for different purposes such as to expand operations; finance new equipment and inventory; or meet working capital requirements until new earnings reach a desirable level.

Therefore, as a forward-looking and savvy business owner, you should understand what is the ideal loan for your business growth.

Secured Vs Unsecured Business Loan

SMEs can typically choose between secure and unsecure business loans. While these terms may sound familiar, you must understand what they mean. A secured business loan is a loan where the lender offers a sum of money against a collateral which is also known as ‘security’. This collateral could be a property. In the eventuality that the loan applicant fails to repay the principal and/or interest amount during the fixed tenure, the lender can take action as per the terms of the agreement.

In case of unsecured business loans, an SME does not require any collateral. This is generally offered to the borrower depending on their credit rating and perceived repayment capacity.

Why should SMEs opt for a secured business loan?

Here are some reasons why secured business loans are the smart choice to power your business growth and unlock your true potential.

• Loan approval chances are higher in a secured business loan as the risk factor is lower for the lender due to the security of a collateral.
• Secured business loans generally have a lower interest rate as compared to unsecured business loans.
• The property that is collateralised against the loan can be used by the borrower as it was used before the loan. The lender will require the mother deed of the property and as soon as the loan is paid off, the lender will return the property documents.
• A business owner can avail of a secured business loan even of their credit score is not very good.
  
  

Click here to apply for a secured business loan.

Also read: 4 Golden rules when borrowing for a business loan

Image source: shutterstock.com