Choosing between a secured and an unsecured business loan can make a world of difference for your growing small business. But how do these two types of loan differ from each other? Which one would best suit your business needs? Here's what you need to know.

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Secured Loans

Secured business loans require the borrower to provide collateral or any form of acceptable security against the amount being borrowed. Depending on the lender's criteria, the borrower can use his or her home, car, equipment, inventory, cash savings and/or accounts receivable to guarantee that the loan will be repaid.

Secured loans pose less risk to the lender since they have something that can be called upon when the borrower defaults on his repayment. As such, this type of loan offers higher loan amounts, lower interest rates, faster approval rates, and longer repayment terms.

Unsecured Loans

In comparison, startup unsecured business loans do not require any collateral and merely relie on the credit history and financial capability of the borrower. This type of loan is usually offered to individuals or business owners who are considered to have good credit or those who have large balance sheets, short-term assets and/or impressive cash flows that are in excess of the required loan payment.

Since unsecured loans carry more risks, they offer lower loan amounts, higher interest rates and shorter repayment terms. Despite these things, however, unsecured loans can be a relatively easy and flexible way for business owners to get additional funding for their endeavors.

Whether you choose to apply for a secured or unsecured business loan, you may need to complete and present a properly filled out Loan Application form to help you obtain the financial assistance that you need. Afterward, a Loan Agreement should be signed by both the borrower and the lender to enforce the terms of the loan. 

Get started Start Your Loan Agreement Answer a few questions. We'll take care of the rest.

Get started Start Your Loan Agreement Answer a few questions. We'll take care of the rest.