In our current economy, a lot has been said about the risks of unsecured lending, but what about the benefits? Even in a tough financial period new businesses need seed money and established ones need a way to keep their doors open. While there is risk involved in borrowing money, with the right planning and responsible spending, you can keep it minimal. In this article, we’ll discuss several of the key benefits you can access through unsecured business loans.
The Fantastic 4: The Benefits of Unsecured Business Loans Exposed
To properly weigh an unsecured financing decision, you should look at both the negative and positive sides of the scale. The benefits listed below will help you determine if, in fact, they do outweigh the risks.
Benefit one; no collateral requirement. An unsecured loan or line of credit gives the borrower the necessary funds without backing the loan with collateral. There is no need to insure the debt with property, vehicles, or other assets. This is a flexible way for you to establish good credit without any loss of property if the borrower defaults.
Benefit two; credit is a reusable resource. The majority of unsecured business loans can be structured like a credit card. The borrower is given a set limit and, as long as the balance is paid, that credit can be reused as needed. The limits are smaller than secure loans to reduce lender risk, but if the borrower is willing to meet additional terms, it is negotiable. This option eliminates the hang ups of traditional loans and cash advances because businesses do not need to continually re-apply for funding.
Benefit three: the loan is open-ended. Typically, unsecured funds do not run on a term or have a pre-determined end date like their counterpart. You do have to meet certain approval guidelines, make payments as agreed, and avoid default; but honoring these terms gives you access to the funds when you need them.
Many borrowers make the mistake of thinking that default penalties do not apply to unsecured business loans. Although these loans are collateral-free, lenders have a legal right to recoup their debt. If you default, they can pursue legal action and put liens on your property until the debt is paid. To avoid this resolve any payments issue immediately and work with the lender to reach a satisfactory agreement.
Benefit four; the financing is unrestricted. Lenders of unsecured funds have left the spending responsibilities to you-the business owner-as long as the money is used for business expenses the floor is yours.
Unsecured loans may have risks involved, but the question to ask yourself is; are those risks worth taking in order to have renewable resources at your disposal as needed? Can these resources help your business survive and thrive in lean sales periods? Most importantly, with planning and fiscal responsibility, can unsecured business loans you transform your professional dreams into a profitable reality? Whatever your goals, use the information above to make the decision that’s right for you.