Unsecured loans allow you to borrow money and use the funds for almost any purpose. The funds can be used to start a business, purchase a franchise, consolidate debt or provide working capital for your existing business or franchise.. By Chris Fuller
Unsecured loans allow you to borrow money and use the funds for almost any purpose. The funds can be used to start a business, purchase a franchise, consolidate debt or provide working capital for your existing business or franchise.
Unsecured loans vs. secured loans
When a lender offers you an unsecured loan, they won’t require any property or collateral to secure or guarantee the loan. This is in contrast to a secured loan, such as a mortgage. If you default on a mortgage loan, the lender has the right to seize your home through foreclosure, and then sell your home and collect what is owed through the proceeds of the sale. There is no specific collateral pledged with an unsecured loan. This makes it less risky for the borrower because there are no immediate consequences if you are unable to pay back the loan.
Unsecured loans pose a much greater risk to the lender than a secured loan. This is due to the lender having less avenues at their disposal to recoup their funds if the loan is defaulted on. Because lenders take on more risk with unsecured loans, rates are generally higher than they would be on a secured loan product, such as a mortgage or auto loan.
How can an unsecured loan help your business?
As any business owner will tell you, when starting a business everything costs more and takes longer than expected. This is where an unsecured loan might be a perfect solution. The loans can be funded quickly and without a tremendous amount of paperwork. Unsecured loans typically fund in one to three weeks, unlike an SBA loan, which could take months.
Unsecured loans can be used for a variety of business expenses. If you are opening a franchise, they can be used for your franchise fees. They also can be used to cover build-out expenses for a new location, even including purchasing furniture and fixtures. Unsecured loans also provide an alternative to traditional equipment financing. New businesses and startups are usually charged fairly high rates when they look to lease equipment for their new venture. An unsecured loan may provide a less expensive option in this scenario. Unsecured funding can also be used for inventory, staffing, and working capital for new businesses.
American Business Credit specializes in unsecured funding. If an unsecured loan would help your franchise or new business, contact us today. We are standing by.
Chris Fuller has been involved in business finance for over 25 years. Fuller started out in equipment leasing and then founded American Business Credit in 2006. American Business Credit’s core business has been to assist clients in using unsecured funding options to start and grow their small businesses.