The growth and success of most businesses often require access to additional funds. If your small business is in need of extra money, secured loans can be the key to overcoming challenges or taking advantage of available opportunities.
A secured loan is a type of financing that is backed by collateral. This collateral is leveraged by business owners in order to provide lenders with a sense of “security” in case of foreclosure.
This loan requires upfront collateral which reduces risk for the lender, often allowing them provide a lower interest rate that can be paid back more easily by the borrower.
Secured financing is typically offered by financial institutions to business owners who require capital to start a new business, expand an existing one or pay for business-related expenses.
However, there’s more to the story here — and it’s essential for borrowers to clearly understand the commitments they’re making or risks they face before entering into a secured loan agreement, not after.
To that end, here are 10 things borrowers need to know:
Unsecured business loans are financing options that do not require collateral. These can be great options for business owners who have limited assets, and want to protect their personal or business real estate. However, unsecured financing does not help build credit and establishing lasting relationships with lenders. A secured business loan is the best option to achieve these kinds of goals.
That’s why with a secured financing, you’ll find that traditional lenders feel safer, interest rates are generally lower, and terms are generally more agreeable to the borrower’s business needs.
Utilizing a secured financing is a great way to ensure a lower interest rate, a longer repayment period, and the opportunity to build credit and forge a relationship between business and credit provider. National Business Capital & Services strives to understand each business’ unique history, present position and future needs to provide the best financial assistance possible.
National’s 90% approval rates, zero upfront fees and years of experience providing honest, professional financing advice is on your side. Take advantage of expansion opportunities, amass seasonal inventory, and engage in lucrative marketing initiatives with small business loans.
Many borrowers simply don’t have enough collateral to obtain a secured loan. What’s more, some lenders — and especially banks — are notorious for under-valuing collateral, because it further reduces their risk exposure.
For example, a piece of high-end industrial equipment that 10 out of 10 marketplace experts would say is worth $60,000 might be valued by a lender at $40,000. If the unsecured loan requires $60,000 worth of collateral, the borrower will need to pledge another $20,000. Is this unfair? Yes. Does it happen all the time? Unfortunately, that’s another yes.
Many lenders who insist on collateral refuse to expedite the valuation process, frankly because it’s not in their interest to do so (again, banks spring to mind here).
Unfortunately, this means that the loan application process can take several months, which for many borrowers is simply not feasible. They need funds within days to cover unexpected expenses, or take advantage of limited-time opportunities.
Fortunately, National uses innovative alternative lending methods to secure financing for their clients in as little as 24 hours, without hassle.
Many borrowers who pledge personal and/or business assets are unpleasantly surprised to discover that they — and not the lender — must pay for the collateral valuation.
This amount can be hundreds or thousands of dollars, must be paid up-front, and there’s no guarantee that the valuation will be sufficient to cover the loan. If not, then prospective borrowers do not get their up-front fees back.
Fortunately, companies like National offer secured business financing options with little to no upfront costs, regardless of credit score and financial history.
All types of small businesses could benefit greatly from this type of loan. However, companies that have mutual funds, vehicles, inventory, equipment, accounts receivable, land, buildings or other real estate to put up as collateral will have significantly lower payments, and significantly longer repayment periods. Compared to unsecured, collateral-free loans, secured funding typically comes with better terms.
Unsecured business financing is isn’t secured by assets or collateral. Instead, borrowers provide a personal guarantee that they’ll pay back the loan regularly, in full and on time.
There are both term loans without collateral and business lines of credit. These are great options for business owners with limited assets, as well as those that simply that do not feel comfortable with leveraging their own personal or business property.
If an unsecured business loan is what you’re after, then the Expert Advisors at National suggest NOT going to a traditional lender by any means. Conventional methods of getting unsecured financing involve skittish bankers that don’t like the idea of providing capital with no leveraged assets. They will give you terms that are unruly, unpredictable, and generally awful in terms of accommodating to the financial needs of your company.
Instead, choose an alternative lender like National that understands that “unsecured” doesn’t have to be a scary word. In fact, unsecured business loans and unsecured business lines of credit are oftentimes just as effective if not more so than secured loans. The freedom of not having to leverage collateral eliminates the risk of losing any assets, while also getting the cash flow you need to grow.
However, unsecured loans aren’t always the best way to go for everyone.
You can get one through traditional lenders, in which secured financing is extremely difficult to qualify for, and can take upwards of months to receive funding.
Or, you can get secured financing through an alternative business financing company like National, who streamlined and expedited the funding process to get you the secured funds you need, exactly when you need it.
Without any confusing jargon, National’s Expert Financing Advisors clearly explain how our different unsecured and secured business loans work, answer questions that are specific to your business and objectives, and empower you to make the smartest and safest choice for your business.
If that means you ultimately partner with us, we’d be honored to be a part of your success story. Or, if you decide to head in another direction, it will still be our pleasure to help you boost your business loan IQ, and make a decision that is in YOUR best interest — not your lender’s!
It’s beyond the scope of this (or any other) article to definitively advise you on whether an unsecured or secured financing is right for you.
However, many borrowers who wisely perform their due diligence opt for an unsecured loan because it’s more versatile and flexible than a secured loan, and the application process much simpler, easier and faster.
Mo business should be penalized for being designed in a way that benefits from one type of loan over another.
We offer a vast variety of secured financing and credit lines with terms that always accommodate to the needs of our customers. Because every business deserves an equal chance at success, and an equal level of respect, am I right?
You don’t need stellar credit and a spotless financial history. National offers secured financing options for business owners of all credit profiles, including:
Business owners with poor FICO scores will need to do at least $120,000 in annual gross sales, and to have been in business for at least 6+ months to get approved for bad credit secured funding through National.
Here are the 5 simple steps to take in order to get a secured business loan:
Now that you’ve got all your specifics ready to go, give our experts a call at (877) 482-3008 for advice on how to get started, or fill out our 1-page, 1 minute application to get the secured financing you need in as little as 24 hours, with NO FICO, annual revenue, or time in business required!
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!
Megan Capobianco is the Marketing Manager at National Business Capital & Services. Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.