Unsecured Business Loan types

This article deals with all the different kinds of business loans available. They are detailed as under:

 Secured Loans: Here the borrower promises his assets as collateral against the loan. In return, the creditor grants the business loan. The assets he or she pledges then become a ‘secured loan’. In case the borrower fails to repay back the loan, the creditor gets the possession of the collateral. As a consequence, the creditor can easily recover the amount of the money loaned by selling the collateral.

Types of Secured Loans
• Mortgage Loans: As the name implies, a mortgage loan is taken against the borrower’s properties like houses, office complexes etc.
• Non-recourse loan: This is a secured loan in which the only security the creditor has against the borrower is the collateral. It is known as a non-recourse loan because, here, the creditor has no r provision against the borrower apart from the collateral, in case of a failure in payment of the loan. However, this is only after ‘foreclosure’ by the borrower.
• Foreclosure: This is a legal process, initiated by lawyers on both sides in which the mortgaged property is sold by the defaulting borrower to repay his debt to the creditor.
 Unsecured Loans: An unsecured business loan is the exact opposite of secured ones. It is a type of loan in which there is no requirement of collateral. This type of loan is extremely difficult to obtain. Here, the credit rating of the business matters. The higher the credit rating, the better the chance of obtaining such a loan.

 Start-up Loans: They are very basic loans, in which the loan is applied for a new business venture. Meticulous and careful planning is a must, before applying for a start-up loan. One must fully assess the exact loan repayment capacity of the business and if it is indeed wise to obtain a business loan at all.

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