Is an unsecured loan safe for your small business?

Small business owners often require loans for a variety of purposes. They may need to open a new location, invest in new equipment, or they may need a loan to purchase supplies in order to fill a large order. But if you haven’t borrowed a lot in the past, you may wonder whether or not an unsecured loan is safe for your small business.

So, in this blog, we want to take you through some of the main considerations you should take into account when getting an unsecured business loan in order to help you make an informed decision.

What is an unsecured loan?

There are two basic types of loans: secured loans and unsecured loans. A secured loan is a loan that is guaranteed by an asset. For example, a mortgage is guaranteed by your home. A secured equipment loan is guaranteed by the equipment that you use the loan to purchase.

An unsecured loan is a loan that is not guaranteed by another asset. When you use your credit card or a personal line of credit, for example, that is a form of unsecured loan.

What should you consider before getting an unsecured loan for your business?

Before you get an unsecured loan for your business, here are a few things to consider:

Can my business handle the payments?

Usually, you get a loan because you do not have the cash flow necessary to finance a certain business expense. You do need to make sure however that you can at least handle the loan payments. If you cannot, this could damage your business credit rating. Fortunately, there are lots of options including interest-only loans that you can talk to your broker about.

What is the interest rate?

Generally speaking, an unsecured loan will have a higher interest rate than a secured loan simply because the lender is taking more of a risk. Unsecured loans however are usually for shorter terms, and the benefits may outweigh the drawbacks if the loan is used to help your business succeed.

How will this loan help my business?

Finally, one of the most important considerations when getting an unsecured loan for your business is how that long will help your business. Although you may be hesitant to take on debt, a loan used in the right way could ultimately help your business to become more profitable.

Contact 1Onefund Financial today

Would you like to speak to someone about getting an unsecured loan for your business? If so, contact 1Onefund Financial today.