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UK Finance Forums
By joanne
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Business Secured/Unsecured Loans
Capital is the most important resource of any business. Whether you are a manufacturer or a service provider, you need funds to run your business. The other resources, including labour and machinery, are worthless if you do not have money for your business. Money is required whether you want to start a new business or expand an existing one.
You can manage a small business with your funds. But if you are running a big business or you are looking to expand, then you will require money from outside. You may invite partners to invest in your business, but this will dilute your stake in the business. If you want to retain a complete control over your business, then you should go for a business loan.
Getting a business loan, secured or unsecured is not a problem for those who already have an established business. Lenders are not worried about their ability to repay a loan. They might have some apprehensions if you are starting a new business.
In such a case, they are not sure about your ability to repay a loan. Therefore, they might charge a high rate of interest. If you are looking for a business loans for a new business, it is recommended that you go for a secured loans. Since you offer your property as collateral, lenders might be interested in giving a secured loan to you.
Moreover, the rate of interest on secured loans is lower than the rate on unsecured loans. Secured business loans are usually availed when large amount of money is required to buy fixed assets, such as land, building or machinery. Unsecured business loans are usually availed to pay for day to day business operations.
Since an unsecured loan does not require collateral, your credit history influences the lender's decision of whether to give a loan and at what rate. Having a bad credit history is not a deterrent when you apply for a secured business loan. However, you might face some difficulty in availing a bad credit unsecured business loan. Your application for a bad credit unsecured business loan will be accepted in most cases, but you will have to pay a high rate of interest on such a loan.
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