Unsecured Business Loan

There are more options available, to obtain an unsecured business loan, then most business owners realize. What types of unsecured loans are available? What are the differences and where can business loans be found? We provide all the details.

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Unsecured Small Business Loans
Unsecured Loans For Self Employed
Unsecured Business Loan Bad Credit

When To Use Unsecured Business Loans
Since the lender does not receive collateral in exchange for an unsecured loan, interest rates are generally higher than for secured loans. See unsecured loans vs. secured loans for additional information on the differences. Does this mean you should only consider unsecured business loans when you do not have collateral available? Absolutely not, there are several reasons you may still want to consider a unsecured business loan even if obtaining a secured business loan is possible.

One example is if the loan is for a high risk situation and you do not, or cannot, lose your item in collateral. We are not advocating that you should not pay your loans, however it is easier to negotiate a settlement when collateral is not involved. For example if your collateral was a delivery truck for your business and your business could not operate without the truck. It would be better to pay slightly higher interest for a loan then risk losing the, business essential, truck as collateral on the loan. Same goes for houses, etc.

This leads us to another reason business owners opt for unsecured loans. If you have a business partner(s) and the business is shared. It may be easier to apply for the a unsecured loan rather than appoint one person with putting up collateral or trying to split the collateral between all the business owners.

And of course as is often the case with small businesses and start up businesses. You do not qualify for secured loans, due to not having collateral. For these situations you may want to consider a unsecured start up business loan or a unsecured small business loan.

Types Of Unsecured Loans
There are three popular types of unsecured loans typically available in the United States, and in fact any can be used for business purposes. The three being the personal unsecured loan, business unsecured loan and business unsecured loan with a personal guarantee.

The personal unsecured loan provides the borrower with a loan of money to do whatever the borrower feels like. In exchange the borrower signs a written agreement to repay the loan within certain terms. In this case the borrower is held responsible for repaying the loan.

The unsecured business loan is one that is made to, and should be used by, the business. Similar to the personal unsecured loan, this loan is made to the business in a set amount of money and the business can do what it desires with the money. In exchange the business will agree to certain payment terms and conditions. If the loan is not repaid, the business is held responsible. This type of loan is difficult to obtain unless your business has a proven track record of generating income that is capable of repaying the loan. Even then these loans can be hard to find if economic conditions are such where businesses are at risk. If your business has not yet established a steady income you may want to consider one of the other loan options or see our unsecured start up business loan section for other options.

The third type of unsecured loan is the unsecured business loan with a personal guarantee. Basically this is a combination of the previous two loan types. The loan is made to the business but the borrower is responsible if the business fails to pay the loan according the terms. This is the most common unsecured business loan.

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