Running and expanding a business require a handy flow of cash, fulfilling the financial demands of the company. Even starting a business requires a decent investment in the form of loans from various sources.
- Common Loan Types
A borrower may obtain funding from the lender in various ways; for example, accounts receivable financing, merchant cash advance, Bank Line of Credit, Term Loans, loans from friends and family, etc. Each financing structure has its own pros and cons. Broadly, business loans can be classified into two main categories – secured and unsecured loans.
With a secured loan, the borrower pledges some kind of assets which can be personal or business-oriented. Borrowers without a great credit history can readily obtain this type of loan. On the other hand, an unsecured loan is one that is obtained without any guarantee from the borrower. By and large, a convincingly good credit score is required for the loan sanction.
- Advantages of an unsecured loan
Unsecured business loans are easier to acquire than secured business loans because it is not obligatory to guarantee any asset for collateral. This serves as a benefit for small business owners, as they often don’t have major assets that can be put up as loan security. Even, if a business owns the kind of assets lenders are looking for, they may not wish to risk a valuable asset in place of collateral.
Business owners may get a funding ranging from $5000 to $500,000 depending upon the business size and its credit-worthiness. Considering unsecured loan default cases, a lender cannot take any of the business assets unless he obtains a court order.
A financial partner group, in this regard, provides services to help clients improve their credit rating. Skilled experts help businesses organize and identify the key concerns to keep the borrower’s credit status in a healthy state.