Secured and Unsecured loans

Secured loans

Secured loans are loans that are secured by collateral. The lender will take a security interest in your property. If you do not pay the loan back the lender has the right to seize your collateral. Most lenders will require collateral to secure a small business loan and they make take a security interest in your business and/or personal assets. Lenders will not lend you more than 100% of the value of your collateral and will usually only lend you 60% to 80% of its value.

Unsecured loans

Unsecured loans, as the name implies, are loans that are not secured by any collateral Credit cards, while not technically loans, are the most common example of unsecured debt. The lender is loaning you money based on your reputation and credit worthiness.

It is very, very rare to find a lender willing to give you an unsecured loan for a new business. They are not willing to take the risk because you have no track record for them to work from.