This post was originally published on On Deck
Starting and growing a small business often requires access to capital. While some entrepreneurs might have savings to invest, many turn to business loans to secure the necessary funds. When seeking financing, one crucial decision to make is whether to opt for a secured loan or an unsecured loan.
So what’s the difference between the two? And which is better?
Each option comes with its own set of advantages and drawbacks that can significantly impact your business’s financial health. Let’s explore the differences between secured and unsecured loans, some pros and cons of each, and the types of collateral used for secured loans.
Are small business loans secured or unsecured?
Small business loans can be either secured or unsecured, depending on the type of loan and the lender’s requirements. Secured loans require the borrower to offer collateral, such as equipment, real estate or inventory, which the lender can claim if the loan is not repaid. These loans often come with lower interest rates since the collateral reduces the lender’s risk.
Unsecured loans, on the other hand, do not require collateral but typically have higher interest rates and stricter eligibility criteria. The choice between secured and unsecured loans often depends on
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