What Is Better For a Business: Secured or Unsecured Loan?
Having your own business provides you with enough freedom, flexibility and opportunities to explore and develop a business concept. While it is exciting, starting your own business can be expensive too; that’s why entrepreneurs often ask the question, “which is better: secured or unsecured loan?” Both loans can meet your business needs. The only major difference is that, when you failed to pay your secured loans, you may lose the asset that you secured it with, while you may only have to pay penalties if you fail to pay your unsecured loans.
Consider these two factors when choosing between secured or unsecured loan:
Amount of money you need
How much you need depends on what you want to achieve. If you want to earn a supplemental income, you can start with something small. But, if you like to compete with the big names or hoard the customers into your store, and earn big bucks, then prepare to spend more money than small time entrepreneurs. To determine the amount of financing you need, start with your business idea.
Do some research and develop a business strategy that will not only help you create the product or provide the services, but to make it accessible and appealing to customers. Determine the type of marketing approach you need to get sales and address important issues in the operation of your business. It may include the human resources, suppliers, and partners, or even the community and your target customers.
Personal financial resources you are willing to spend in your business
Being your own boss is fun. But wait till you start working for yourself to realize that you’re a terrible boss. Yes, you may find yourself working in the middle of the night or wee hours in the morning. You may be surprised that many entrepreneurs find conversing with clients or negotiating with customers or partners while taking lunch is normal or running through a busy side walk is normal. And, if you’re tired of a boss who keeps on bugging you about deadlines, wait till you set your own deadline, and you may find it very addictive to bug yourself with unnecessary concerns most of the time. The reality is that your customers are your boss. And no, that’s not all. It takes money to run a car and you need bills to pay, suppliers to keep and customers to please.
So, yes, you may need more than the actual financial resources you have right now. You got to learn how to pull strings-and by strings include financing institutions that can provide you with business loans in a snap. It is because you cannot get an immediate income from your business because it takes at least 6 months before a new business can pay for its own bills. So, having a cash reserve and getting a business loan would surely help.
Remember that many businesses fail because of poor capitalization. When you have insufficient capital, you may make bad business decisions like getting business loans with hefty interest rates. Similar situations may result to serious credit issues and bankruptcy.
Do you want to know which is better for a business: secured or unsecured loans? Contact us and our in-house loan advisers will guide you in the decision making process.