Interest rates are one of the big differences between secured and unsecured small business loans. Because your loan is secured with collateral, secured loans tend to have much lower rates than unsecured loans. The lender needs to have some sort of incentive to give an unsecured loan, and they do this by generating a larger profit through higher interest rates.
The terms you agree to for repayment, make a big difference in whether or not you’ll want to do a secured or unsecured small business loan. If you plan on repaying the loan immediately and in full, you don’t need to worry about being charged interest, so the high rates on an unsecured loan won’t matter.
If you’re not in a position to immediately repay your loan and it looks like you’ll be accruing some interest it may be better to seek a secured loan. When this isn’t an option, remember that you can also seek lines of credit or business credit cards as business funding solutions.
The interest rates aren’t the only thing to consider when weighing the pros and cons of unsecured small business loans. You should make sure that you consider all types of business funding before making a decision on applying for an unsecured small business loan.
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