Some Good Reasons to Land an Unsecured Small Business Loan

Many small businesses face a need from time to time; they need a cash infusion to keep things flowing smoothly, to smooth the bumps in the road many small businesses often travel. Perhaps you need to move to new property or offices. Perhaps you need some new machinery or computers to increase productivity. Faced with these or similar needs, it is often prudent to consider getting an unsecured small business loan.Small businesses do have optionsYou might also want to consider getting a business line of credit. These are not addressed to any specific need or purchase, they are more of way to have cash available should you need. But, if you have business plans that specifically outline certain purchases or upgrades, an unsecured small business loan would probably be in your best interest.Secured loans and unsecured loans have their differencesConsider a couple of factors when weighing the benefits of an unsecured business loan as opposed to a secured one. One consideration will be the interest paid. Interest rates hover around the base being used by the financial markets at the time, but they are not set and they can differ widely lender to lender. You will pay lower interest rates on a secured loan.Secured loans offer backup to the lenderSecured loans are backed by collateral and this offers the lender security should the borrower default. For instance: If you purchase real estate for you r company or a company vehicle, and you default on the loans that purchased them, the lender can seize the vehicle or the property and sell it off to cover the cost of the loan. With this reduced risk, the lender is willing to lend to a small business at lower interest rates.Unsecured small business loans do have higher interest ratesOn the other side of the fence, loans with no collateral have nothing to back them up except the business history and you r credit scores. These are used to determine the likelihood of repayment. You are receiving money on your good name alone. But, this increased risk means higher interest rates. And sometimes this can be a significant cost.Risk-reward factors play a part in your choice of loansYou have to weigh the risks and the rewards of each type of loan. If you have property to back up the loan, that does not necessarily mean you should use it. Do not forget, if that loan is not repaid according to the terms and conditions of the contract, the collateral is gone. It is never wise to put up personal property as collateral for a business loan. You do not want to lose your home.Small business owners should have contingency plansYou should always have a contingency plan to leave your personal finances unscathed should the business fail. You should always have plan to gracefully exit the business, personally and financially, should it not work out. After all, you will want to start another business one day. Considering all this, you will probably come to the conclusion that an unsecured small business loan is your best bet, even if the interest rates are higher.