Knowing Your Options Is Important When Applying for Business Loans
When you are applying for a business loan, it is important to choose the type of loan that is appropriate for your needs and purpose. There are many types of loans available today, but they all fall into two basic categories and these are secured and unsecured business loan. These two have their own pros and cons.
Secured Business Loans
Among the two, this is easier to get and credit record is not a factor, since there is collateral for this loan. There is wide range of things that you can use as a security for the loan and it includes real property, equipment, inventory, and accounts receivable. . The amount of money that you can borrow depends on the total value of the collateral you have presented. However, one of the downsides of this type of loan is that you will lose your asset when you are unable to repay the loan.
Unsecured Loans
If you do not have an asset to present, you can still get the money that you need by applying for unsecured loans. However, lending companies will only approve your application if you have a good credit rating, a profitable business history supported by audited financial statements and tax returns. Usually, unsecured loans, charge higher interest rates because of the higher risk involved. This is the reason why business companies prefer to choose secured business loans.
Choosing a Lending Company
Although it is more advantageous to apply for secured loan, due to its low interest rates, you need to remember that there is no risk involved for the lending company. You are the one who have the risk of losing tour asset. Therefore, you need to shop for several lending companies to see which one offer the lowest interest rate.
You also must also know the true value of your property, so that you will know whether the lending company is already taking too much of your assets as collateral. Usually lending companies have the tendency to be overprotective, asking for security that is more than the amount of money you have borrowed.
Taking careful consideration of these things will enable you to choose the right kind of loan for you. Rushing things will lead you to nowhere and might even cause the loss of your property, due to unwise decision. Therefore, before applying for a loan, you need to take adequate amount of time to know your options and search for the right lending company.
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