Small Business

What's the Difference Between Secured and Unsecured Business Loans?

1/10/20 Ricky Baizas

LoanMe gives you the opportunity to obtain unsecured business financing without the harsh qualifying standards or high costs.

 

When it comes to getting a business loan, you have two options: secured or unsecured.*

 

Put simply, a secured loan is one where you put up collateral. And since lenders view secured loans as a safer bet, these are the options they typically push for.

 

“A secured loan is one where you put up collateral.”

 

Say you’re borrowing money to hire new staff or consolidate high-interest debt. A traditional lender will likely require some form of collateral, maybe even personal assets. This means you could be forced to put up your home or vehicle in order to obtain the funding you need.

 

How collateral can get complicated

The idea of putting up collateral for a secured loan may seem straightforward enough, but for many borrowers, this is not quite as simple as it sounds.

 

First, many businesses don’t have collateral that is considered acceptable to a bank. What’s more, some may not have any collateral at all.

 

For instance, if you lease your space, as many businesses do, you don’t actually own the premises. This means you don’t have real estate to put up as collateral.

 

In this case, the lender may require you to put up personal assets. However, most business owners would likely want to keep their business and personal finances separate.

 

This is a very common scenario, and can lead to business owners being shut out of the loan process.

 

Explore your options for business funding

Fortunately, there are lenders that will provide a loan to a small business without requiring collateral. These lenders look at the business differently than traditional financial institutions and can create solutions that work for borrowers without the need for collateral. That’s great news for businesses that either don’t have collateral or don’t want to risk their assets.

 

However, keep in mind that not all unsecured lenders are created equal. Many will require businesses to make high daily payments to reduce the risk of not securing the loan with collateral, and will create a repayment schedule that is very short term so they can be repaid quickly. This schedule requires a high payment and cash flow burden. So, businesses are getting a high daily payment in exchange for not putting up collateral.

 

LoanMe is different. LoanMe gives you the opportunity to obtain unsecured business financing without high daily payments. At LoanMe, you can receive your loan without collateral and pay only one monthly payment that is typically less than half of other companies lending on an unsecured basis.

 

Get your business on track without the hassle

LoanMe provides unsecured loans to businesses that don’t qualify for traditional financing or have urgent short-term cash needs.

 

We do not require your home or other personal assets as collateral. Our qualifying standards for funding are simple and straightforward.You must:

 

  • Have a for-profit business that has been in operation with income for at least two months
  • Have a business bank account in the name of your business
  • Have a personal credit score of 500 or more

And unlike unsecured loans from banks and other traditional lenders, getting business funding from LoanMe is a quick process. You can apply online anytime 24 hours a day, seven days a week. You will receive an instant online decision and have cash wired into your account in as few as 24 hours.

 

Also, instead of contending with the higher costs of traditional unsecured business loans, our financing allows you to depend on a fixed interest rate with low monthly payments. You will see loan options and costs upfront with no hidden fees, and only pay interest for the days you borrow. There is also no penalty for paying off your loan early, allowing you to reduce interest costs further.

 

LoanMe’s financing features some of the longest term lengths in the industry, which is why we’re able to offer such low, fixed monthly payments. This removes the cash flow burden on your business that some loan options create, as they must be paid off more quickly and on a daily basis.

 


*This article has been prepared for general information purposes only. The information presented is not legal, financial, tax or accounting advice, is not to be acted on as such, and is subject to change without notice.
 
Credit approval is subject to LoanMe’s credit standards, and actual terms (including actual loan amount) may vary by applicant. LoanMe requires certain supporting documentation with each new application. If you have any questions regarding this, call us at 844-311–2274. California loans are made pursuant to LoanMe’s California Department of Business Oversight Finance Lenders Law License #603K061. LoanMe also offers loans in certain other states which may have higher minimum loan amounts.
 
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