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How much a lender is willing to lend can depend on a variety of factors. One of the key factors is whether or not the loan is secured or unsecured. Let’s explore the difference.
When your business takes out a secured business loan, you use an asset as collateral should you default on your payments.
In many cases, this collateral is what you have used the loan to buy. A mortgage on a property, or a car loan are typical examples where the property and the car remain the property of the lender, until the loan is paid off.
Basically, if you default on your loan, then the lender has the legal right to recover their losses through the sale of your asset.
So, with secured loans, the risk to the lender is lower, therefore, they may be prepared to lend you higher amounts.
The lender may also be more likely to let you pay back the loan over a longer period of time.
With an unsecured loan, the lender will let you borrow money according to your personal and business financial circumstances rather than against a physical security. How much they will let you borrow, can depend on individual circumstances.
Because these loans are unsecured, they are harder to get approved for.
Things that could help you qualify for an unsecured business loan.
Certain documentation can be helpful, such as a cash flow statement, which can give a lender full details of things like:
You could also benefit from having a good business plan to show to lenders.
So, as you’ve probably worked out, the better all of the above details look to a lender, the more they are likely to lend to you.
If you can answer this question truthfully and have the stats to back it up, then you could be in with a chance of convincing a lender to fund your loan.
Here are a few things you may want to think about:
iSelect have teamed with Valiant to let you compare a wide range of lenders and help you find a loan that suits your business. Get started comparing loan online today!
Last updated: 15/03/2022