Dos and Doníts of unsecured business loan
Posted by Saloni Nair on June 28th, 2019
“You need money to make money!” is one of the wise money quotes. Anyhow, it certainly holds true. Not many small and medium businesses have spare cash lying around. That’s why getting an unsecured business loan can come in handy to help you grow your business by providing business funding. There are a couple of tried-and-tested dos and don’ts that you should bear in mind when getting an unsecured business loan.
Dos of unsecured business loan
Let’s have a look at some of the dos of unsecured business loan.
- Do use a reputable lender: Instead of relying on the bank, nowadays, business loan lenders are available in order to provide business funding with an unsecured business loan. When choosing a business loan lender, make sure to choose one with a rock-solid reputation.
- Do offer documents: The documents explain in detail the nitty-gritty of the loan. It is advised that the applicants go through it once before committing to anything. It would also be helpful if they seek the help of a finance expert in order to understand the loan particulars.
- Do budget ahead of time: Preferably, you should aim to repay your outstanding loan as soon as possible. Sort out the calculation and consider the financial impact of your decisions. Think about what you can afford and budget to pay off your loan in a timely fashion.
Don’ts of unsecured business loan
And now let’s have a look at some of the don’ts of unsecured business loan.
- Don’t take more than you need: If you take out an unsecured business loan, make sure you borrow the amount you require. Or else, you may end up spending the extra cash on needless things and will only rack up more interest and fees.
- Don’t maintain a bad credit: Obtaining an unsecured business loan with bad credit is difficult since the lender must assess risk before agreeing to business funds.
- Don’t wait forever to pay: Before taking out an unsecured business loan, you will want to make sure that there are no penalties for paying off your loan early. The longer your loan term or the longer you carry a balance with the business loan lender, the more interest and fee you will pay over the term of the loan. It might feel more expensive to pay off your entire loan at once but it can save you money in the long run.
Be forewarned that even if a lender doesn’t require a blanket lien or personal guarantee, they can still sue you if you don’t pay and seize your assets that way. So to sum up, you shouldn’t choose an unsecured business loan because you think it will protect your assets; rather, this loan type is more appropriate for businesses that don’t have much to offer up as collateral. Nevertheless, for many newer and less-creditworthy businesses that are shut out of the traditional lending market, unsecured business loans can be a boon.