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Starting a new business, no matter how big or small, requires funding. Since you’re contemplating becoming a business owner, you probably have a budget in mind. But what if that’s not enough? What if you need to purchase additional equipment to supply your customers with the best products ever?
What if you need to expand your location to allow more room for certain equipment or offices where more employees could work?
Money doesn’t grow on trees, that’s for sure, but financial institutions have vaults instead of trees where they keep money needed for different reasons. At least half of that money is used on unsecured loans.
Yes, you read that correctly. People have been engaging in personal loans more often nowadays because they need their bills paid. Of course, they use them for other reasons as well, but the point is they need the extra money to satisfy their needs.
It’s the same with business loans, which are also unsecured loans. They serve as financial help for any young business owner looking to make it in the world. So, you can easily take advantage of the opportunity and qualify for one yourself.
What makes these types of loans so attractive for business owners?
No collateral whatsoever
Let’s say that you don’t have any assets tied to your name. This is quite common for people looking to start a new business. If you’re contemplating secured loans, you should know that lenders will need at least one of your assets to claim as collateral. What if you can’t offer that?
Then, instead of getting a secured one, you should look into an unsecured one because they are not backed up by collateral. The lender won’t seize your asset if you fail to make the necessary payments.
Don’t make a habit of avoiding paying your monthly payments. If you’ve made a commitment, then stick to it. Otherwise, what’s the point? The lending institutions won’t give you a loan again and you’ll ruin your credit rating in the process. Is that what you want? No, of course not.
Also, once you pick out a lender, make sure to present them with the validity of your business. You need to provide a document containing your income and profits. You need to convince your lender that you’ll be able to repay the loan, even if business loans don’t require collateral.
Easy application process
Bureaucracy can cause everyone headaches so it’s logical that people want to avoid it as much as possible. Worried about having to fill out a lot of paperwork for a small business loan? Don’t fret because the application process is quite simple and easy. Even the approval process is very fast, but it depends on your credit history, monthly sales and operation time.
If you need cash fast and have a credit score of 700, for example, you can easily get the money you need. Sometimes it even takes a day to transfer the funds into your account.
The application process is typically done online, so you won’t have to wait in line waste precious time you could be using to work on your startup.
Flexibility
Did you know that if you choose an unsecured business loan, you can use the funds however you like? There are plenty of online options you can go through where lenders won’t ask for a detailed reason of why you need the cash.
This type of flexibility is limited when it comes to traditional loans. With them, you would have to explain your reasons for borrowing money because you need to convince the lenders they can trust you with it.
It’s up to you whichever type of loan you decide to use in the end, but an unsecured loan for young business owners is a much preferable option. Keep in mind that these types of loans are usually granted for well-established businesses. They have the priority over startups.
Working on your credit score
Let’s say that you want to build an amazing credit score. If it’s your first time borrowing money from a lending institution, you need to ensure you pay it back within a predetermined timeframe. If the lenders see that they can trust you with their money, you won’t have an issue requesting a business loan once more in the future. That sounds amazing, doesn’t it?
A high credit rating enables you to get all kinds of loans, not just business ones. You will get approved much quicker without having to wonder whether you’ll receive the money or not.
You should also know that the qualifying criteria for unsecured loans very lenient as opposed to secured ones. But, as mentioned above, you would need to provide a document that claims your consistent income.
This means that you would also have to provide bank statements that range from six to twelve months proving that your business is indeed legitimate and making money. Once you do this, you will have no issue getting the money you need and putting towards your business.
Are there any disadvantages?
One of the main disadvantages is that unsecured loans typically go with high interest rates. Why is this so? As mentioned, unsecured loans are not backed up by collateral, which means that the lenders won’t have any way to recuperate the money you fail to pay back.
If you are troubled by high interest rates, maybe it’s better to go with secured loans instead. If you’re in a pickle, take the time to do research and do the math in advance. You need to be absolutely sure in your decision because it can affect how you spend your money for a very long time.
With high interest rates come high individual loan payments which can be also challenging to afford for a lot of people. You might also run into trouble when qualifying for a business loan because of your credit history. So, you need to work on that as well.
A few final words
A good idea is to weigh in the pros and cons of bedriftslån to determine whether getting one will be worth it. You can always resort to other means and get the money from a friend or a relative. You don’t have to go to banks or online lenders.
What you’ll do depends solemnly on your decision, but make sure it’s the right one because your business will depend on it. You can also talk to your loved ones to see what they have to say on the matter. Maybe they’ll offer sound advice you can use to your advantage.
Many people in situations like these turn to professionals like financial advisors as well. Since you’re a business owner, you should always have an expert like that by your side. If you’re not very good at handling money, at least they will offer guidance on the matter and help you preserve your business and earn even more money.
Therefore, an unsecured business loan has the potential to save you from a financial turmoil or cause even bigger problems. So, be sure to do research on the topic to find the best loan for your business!
