Secured vs. Unsecured Business Loans

Business Loans

No business can operate without capital. It takes money to make money, and almost every business needs a business loan at some point in time. Whether it is to expand, purchase inventories or help pay for an unexpected expense, many business owners wonder whether to apply for a secured or an unsecured business loan.

Secured Business Loans

Secured business loans are backed by a cash or physical asset that belongs to you or your business. Applying for a secured loan using collateral increases your chances of getting approved for the loan. However, if you default in the future, your creditor can seize your collateral to help pay the balance on your account. Unfortunately, if your collateral is vital to operating your business, such as a business vehicle or the building you operate your business in, you may be forced to close your doors if you do not pay for your secured loan.

Unsecured Business Loans

An unsecured business loan is a loan that is not tied to any type of collateral or security. In other words, the lender knows that if you default on your loan, the only way to recover the balance on your loan is by winning a lawsuit against your business, which can prove costly for the lender. Because unsecured business loans carry a higher risk, they are not as easy to come by and typically require good or excellent credit to qualify. Additionally, choosing to apply for an unsecured loan instead of a secured loan could mean mediocre finance terms that could leave you paying more in interest and fees over the life of the loan.

Ultimately, choosing between a secured and an unsecured business loan is a decision that is different for each business. If you have excellent credit and do not want to place any of your assets at risk, an unsecured loan may be right for you. However, if you prefer better finance terms or have less-than-perfect credit, you may want to choose a secured loan to finance your business needs.

To apply for funding for your small business, use the form on the right to begin the application process.

For more information, go to Business Loan at

Secured vs. Unsecured Business Loans was last modified: February 23rd, 2012 by Amit Kraidman
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