Any savvy business owner is going to keep their eyes out for opportunities to grow their business.
But sometimes these opportunities can quickly become too much to handle. No matter the opportunity, there is one thing that will always be at the forefront of any business growth: money.
Business owners need money to grow, but money is not always easy to get.
Trying to get a business loan can often be a stressful process, especially because you often have to put up collateral for the loan. This collateral could be cash or bonds, but the important point is that the collateral has to be easily liquidated if the loan is not repaid in the agreed time frame.
This can be a pain for business owners, but there may be a few ways to avoid collateral.
Today we’ll be discussing with you two of them: unsecured business loans and business credit cards. We will go over what these two options entail, and how you can use them effectively to grow your business.
Unsecured Business Loans
As has already been alluded to, unsecured business loans are business loans that do not require collateral. Sounds great, right? Of course, unsecured business loans come with their own sets of benefits and drawbacks. Here is a quick breakdown of some of the pros and cons of applying for an unsecured business loan:
+ Shorter Application Process- Unsecured business loans typically involve shorter application processes due to not requiring collateral. Some loans can even be funded within 24 hours.
+ No Collateral- The most obvious upside is requiring no collateral. A lot of businesses (especially startups) do not have the assets to put down as collateral.
– High-Interest Rates- The biggest problem with unsecured business loans is that they pose very high risks for lenders. Without collateral, the lender has no real way to recoup the loan if it is not paid in full. That means that they will try and shore up the risk in other ways. This is usually done through implementing higher interest rates on the loan itself.
– Stricter Requirements- Because unsecured business loans pose so much of a risk, lenders tend to be very strict on who they give unsecured business loans to. They will look very closely at your profit margin, business credit score, and other factors to determine if they will lend to you.
Keeping these things in mind, unsecured business loans may be right for you if you have a good business credit score, are in need of funding very quickly, and are doing well enough that you can handle paying higher interest rates.
Business Credit Cards
If you have not paid attention to your business’s credit or you have particularly bad business credit, you may want to consider business credit cards. These are exactly what they sound like: credit cards that can be used for business expenses.
As with everything, there are some benefits and consequences of getting one of them:
+ Easier Qualification- Qualifying for a business credit card is much easier than applying for a business loan. As long as your business is well established or you have strong personal credit, lending agencies are likely to approve you.
+ Building Credit- We’ve just discussed how important business credit can be in order to be approved for a loan. A business credit card is a great way to build up credit and give your business more options for financing in the future.
– Higher Priced Financing- Most business credit cards can be a bit expensive to acquire. You also have to be very smart about how you repay them, as the interest rates on them tend to be high and late fees are often even higher.
– Less Purchase Protection- Personal credit cards often have purchase protection that defends against identity theft, incorrect charges or even charging back the card. Business credit cards often do not have these protections, so you need to be very careful not to lose the credit card or make any erroneous transactions that may need to be corrected.
Which one’s right for you?
We hope that this breakdown of business credit cards and unsecured business loans will help you grow your business in the future. Be sure to do your own research to see if one of these options is right for you!