It’s been an incredibly tough year for so many of us but for businesses the COVID-19 pandemic has hit even harder. As a result, there are more businesses than ever before looking to take the edge off the last 12 months of economic devastation with a loan to help them find their feet again and reemerge on the other side of this mess stronger and better.
But while you might be tempted to go for a secured loan because the interest rates are lower, it’s worth thinking about what you stand to lose before you pull the trigger. That’s why we believe an unsecured business loan could be the best choice for your business going forward in the world of the so-called new normal.
The Advantages Of An Unsecured Business Loan
Let’s get this one out of the way first – not every business is going to be able to apply for an unsecured business loan and be immediately successful. Indeed, the reason that secured loans are still so prevalent is that they are easier to apply for. But think about the collateral you‘re handing over. If things don’t work out or there’s another spike in the virus, you could end up owing the lender your business premises, your car or even your home.
With an unsecured business loan, meanwhile, no assets are required, which means the only risk you’re taking is with the money you’re putting into the business. Even if your credit rating leaves a lot to be desired you could also use a willing guarantor to help you get over the finish line, so to speak. Unsecured loans are often also a lot faster, as there are fewer legal hurdles to jump over. This means, as long as you qualify, you could be enjoying your new business capital in a matter of days.
What Businesses Will Benefit From Unsecured Business Loans?
Any business that doesn’t have access to high-value assets would be better off taking out an unsecured loan. Not only do they have more to lose if something goes wrong but they have a greater incentive to build up their brand and scale to make enough money to pay back that loan. They can do this without the sword of potential reclamation hanging over them, which is always a bonus.
The retail, leisure and hospitality sectors are particularly suited to unsecured loans. These are the kind of industries that are more likely to require short-term loans and find themselves looking down the barrel of some unexpected expenses. It’s in these situations that the more flexible and risk-averse unsecured option will always be the better way to go.
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