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Secured And Unsecured Business Loan
Total Articles: 12
Starting your business or expanding an already existing business requires a massive amount of funds. Many of the business people meet the huge financial requirements of their business via business loans. Business loans have made the dream of becoming your own boss achievable. There are a multitude of expenses on the list of a newly beginning or existing business and meeting those expenses becomes vital for a businessman. Business loans provide liquid money in bulk which helps in meeting the various financial needs of a particular business.
Entrepreneurs today have the option of choosing either a secured business loan or an unsecured one. A secured business loan is usually given by government financial institutions. The individual who borrows a secured business loan needs to pledge one of his assets as collateral, against the amount of money which he or she is borrowing. The rate of interest is usually low in a secured business loan and there is a lot of documentation, terms and conditions involved in the procedure of loan disbursement. All applications for secured business loans are not approved at once, since the lenders have a specific set of mandates which the borrower must qualify. If you are looking out to gain quick access to money because of a business requirement which is crucial, then avoid approaching a lender for a secured business loan. The procedure of approving the application and loan disbursement is quite slow for secured business loan. Plus, the limit for taking business loan is also less. However, once you have taken a secured business loan, you can be assured that the loan is safe and secure, with reasonable interest rates.
Unsecured loans on the other hand are the ones which are lent to a borrower without requiring a security. You will not be required to pledge any asset as collateral against the money which you would borrow as business loan. Unsecured loans are usually provided by private financial institutions and companies. These companies lend an unsecured business loan at a much higher rate of interest than the government banks. The risk involved is also higher. However, the people who are starting out a new business or expanding an existing one prefer taking unsecured business loan many a times. This is because even is the risk involved and the rate of interest is higher than secured business loan, the processing is quite prompt. While running a business there are a plethora of expenses which pop up unexpectedly. And in order to meet those, you would want to have quick access to money. Unsecured business loan is prompt and takes less time to process the loan request and disbursement later on. This is because there are less terms and conditions involved and the eligibility criteria are also quite flexible for the loan application process.
Both these types of loans have their own pros and cons and entrepreneurs must check with their own requirements before applying for either one of these.
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