Small Business Loans Overview

As with many other types of loan from personal loans through to car financing, small business loans fall into 2 main categories; secured loans and unsecured loans. Which of these loans is available and the best choice for you depends on a number of factors, such as whether or not you have some collateral that you can put up to back any money lent to you and if you have a good credit rating.

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Secured Business Loans

Getting a secured loan is dependent upon you, the borrower, having something of value that you can offer the loan lender as protection on the money that give you. Basically, the lender wants to be sure that if you fail to meet the loan repayments, they will still definitely get their money back – by taking whatever it is that you have put up to guarantee that loan.

One of the most common pieces of collateral used in such business loans is property, with many loan companies agreeing to lend money against the value of a family home or other real estate that the borrower may hold. Indeed, some lenders specialize in offering so-called residential business loans that are secured by residential properties. Other ways of getting such financing include promising a car or other vehicle, land, or parts of the business that you are actually trying to get the loan for such, as commercial property related to the business.

Downside of Secured Business Loans

Clearly, the biggest danger with this kind of business loan is that if you default on your repayments, you could lose your house, car or warehouse. If you find yourself struggling to make the loan repayments it is vital that you act quickly and talk to your lender to see if there is something that can be done to help you before it becomes too late. Usually, renegotiating a loan involves higher interest rates paid on the loan, so you really want to avoid getting to this point if at all possible.

Unsecured Business Loans

This type of small loan involves more risk for the lender and so comes at a higher cost to the borrower. In this case, the person applying for the business loan has no collateral to guarantee the money lent and the loan company has to accept that they will repay the money based solely on a signed loan agreement and a promise.

Due to the risky nature of this kind of lending, the amount of money loaned tends to be smaller than with secured loans. Also, the interest rates are usually higher and the default penalties, if you struggle to cover the repayments, are generally more severe.

It's worth noting that even if you have a bad credit history and have problems with debts, it may still be possible to get a small business loan in the form of a specialized bad credit loan. If you decide to follow this path, be particularly careful or you may find yourself in even more debt.

Downside of Unsecured Business Loans

As mentioned above, small loans of this nature come at a comparatively high cost when compared with a straight secured loan. There is less flexibility in loan repayments and the interest paid on the money lent is usually high.

As with any other type of loan, if you are struggling to meet your repayments, talk your lender immediately and see if you can come to a revised lending arrangement that is easier for you to manage.

Finally, whatever the loan, and no matter how big or small it is, always do your research first and only borrow money from a reputable lender.

 

Types Of Small Business Loans

When running a business, handling your finances correctly is obviously one of the most important differences between making a profit or going bankrupt. However, for most business people there are times when you're faced with expenses that can't be covered by any savings that you may have sitting in the bank. At such a time, you may need one of the many small business loans available from the banks and finance companies.

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Bad Credit Small Business Loans

If you have a bad credit rating, you may feel that you have little or no chance of getting a business loan, but this is not necessarily the case. People with a bad credit history have usually had money issues in the past and maybe have struggled to make regular repayments on previously held loans, mortgages and so on. However, this does not mean that no one will ever lend money to you again.

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Comparing Business Loans

Deciding which particular business loan is suitable for you can be confusing, so first you have to know which small loan fits your needs best. Each type of financing offers something different and the application requirements can be varied and testing, especially if you have a bad credit rating or have nothing that you can put up as collateral to secure your loan.

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