Unsecured Business Loan’s Advantages and Disadvantages
January 19, 2009 § 4 Comments
Are you planning to start your own enterprise? Or do you already have an existing enterprise that you want to expand? Either way, unsecured business loan will help you.
Many businessmen look for institutions that would lend them some money for their enterprise. Each of them has their own reason to get one. Some are having a hard time looking for collateral to put up in a secured loan, while others just need more capital. Usually, a starting enterprise has more needs and is more likely to look for an unsecured business loan.
Getting an unsecured business loan has many advantages as well as disadvantages. You should consider these if you want to get an unsecured business loan.
Unsecured business loan has three basic benefits.
1.) No property should be given up.
It allows you to borrow money and improve your enterprise without sacrificing any of your collateral or property; you won’t lose any of the things that you own. So what is used in unsecured business loan if collateral isn’t? Usually it’s debt consolidation. It’s also good if you want to manage your finances.
2.) Interest payments are tax-free.
The interest you’ll pay for unsecured business loan can be deducted from your taxes, which is excellent because it will lessen your enterprise’s expenses and can also help in improving its financial condition. Just bear in mind that the interest’s writing off depends on the situation.
3.) New enterprises can also enjoy unsecured business loan.
It is really a big help for persons who are just starting up on their enterprises. Since they are new in the enterprise world, and they are likely to have more problems about the money that a creditor lends them, getting unsecured business loan will give them diverse options if ever they fail to pay on due time.
The Other Side
The following are not totally “disadvantages”. Rather, these just show some requirements that you must have or know to get an unsecured business loan.
1.) Good credit history is a must.
The number one requirement is you must have a good credit history. Of course, who would trust a person who has bad credit standing? Just those who require collateral. If you’re not willing to go into secured loan, you must make sure you have good credit history so you’ll get an excellent unsecured business loan.
2.) Higher interest rates will face you.
Lenders put higher interest rates because there is more risk when they lend money to you without any collateral. Plus, lenders have more administrative expenses for this.
3.) You don’t have much option in payment.
Both its term and payments will be stricter because the lender wants more stability.
In conclusion, unsecured business loan is a great option if you want to borrow money. The only downside is it has more requirements than secured business loan.