Loan bags, family in a house on balance scale, depicts secured vs unsecured business loans
Betsy Wise
By: betsy_wise
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Secured Vs Unsecured Business Loans

Thinking about getting a business loan? The next question may be whether you should apply for secured or unsecured business loans. Then, you may realize you aren’t quite sure how the two loans differ.  

In this post, you’ll learn how owning or not having collateral as well as other factors can have a significant impact on the loan’s terms and conditions. Before you apply for a loan, it’s important to know how these two types of loans vary.

The Differences Between Secured and Unsecured Business Loans

Secured Loans:

  • This type of loan requires the borrower to put up some of their own assets, called collateral, as a guarantee in case of default to pay back the loan. This way the lender assumes less risk. The collateral can include personal assets or assets owned by the business. Examples of collateral include a savings account, vehicle, home or other real property. Most startups and small businesses may not have significant assets to be considered for this type of loan.
  • Normally, secured loans have a lower interest rate as compared to unsecured business loans since the lender uses collateral to secure the loan. Likewise, you may be able to borrow more money. Typically, the repayment term is longer (you owe the debt for an extended period) than unsecured business loans.
  • Should you default (fail to make payments) on the loan, the lender can legally seize the assets used to secure the loan. Since the lender may repossess or initiate foreclosure proceedings, your credit report may show a series of negative entries.
  • If the sold assets don’t cover the loan amount, you are still required to pay the loan balance.

Unsecured Business Loans:

  • Collateral is not used to secure the loan. Therefore, there are no assets to seize if you fail to make payments. Some lenders who offer unsecured business loans require borrowers to sign a personal guarantee agreement. If the business can’t repay the loan, then the person signing the guarantee pledges to pay the balance.
  • To qualify for unsecured business loans, most lenders require that you have a good credit history and a reliable source of income.
  • The amount of money you can borrow may be less because you don’t offer collateral to secure the loan. Plus, the interest rate the lender charges is generally higher than what you would pay for a secured loan. However, since the loan is unsecured, you normally pay off the debt quicker.
  • Unsecured business loans can be processed within days as compared to secured loans which take considerably longer. 

                                          Secured Business Loans                    Unsecured Business Loans

Is It Better to Get a Secured or Unsecured Business Loan?

When weighing the pros and cons of each type of loan, remember to tailor the loan to your business’s specific financial needs. The borrower’s biggest risk is putting up collateral to secure the loan. By doing so, you run the risk of losing your personal assets or your company’s assets if you can’t repay the loan. From the lender’s standpoint, you’re more creditworthy because they can sell your assets. 

In addition to providing collateral, there are other reasons that getting a secured loan can be risky. A lower interest rate and being able to borrow more money is appealing, but incurring loan costs longer means you could end up paying more over the long run. Moreover, repaying the loan for a longer period ties up money you could invest in your business.

Most business owners are reluctant, and rightly so, to offer collateral in exchange for borrowing money. They’d rather get unsecured funding like an unsecured business loan or credit card. On average, they can repay a business loan in 24-60 months and pay off a credit card each statement cycle. Even though borrowers may pay a higher interest rate, they repay the loan quicker and don’t carry the debt as long.

If you’re still uncertain what to do, another solution would be to find a lender who doesn’t require collateral and charges reasonable interest rates. Sounds perfect, right? Keep reading!

Is there any way to protect your assets and also get a reasonable interest rate?

Camino Financial Small Business Loans: Unsecured Business Loans at Reasonable Rates

You may be surprised to learn that Camino Financial doesn’t ask for collateral. That’s because we live up to our motto: “No Business Left Behind.” We give easier access to capital to small businesses that don’t have assets to back up a loan. 

For that reason, our interest rates may be slightly higher as compared to traditional lenders, but still, in the range of the interest you would pay on a credit card. There’s one huge difference. We provide other free benefits as shown below that most lenders or credit cards don’t offer.

  • Possibility of lowering your interest rate: After 9 months of making timely payments, you can qualify for a better interest rate.
  • Fewer requirements: not only is collateral not required, but also we have fewer loan requirements than most lenders. 
  • Fast processing: Once you apply for a loan, you’ll receive an immediate quote. You don’t wait for days or weeks as you do when applying for a loan with a traditional lender. Once we approve your loan, you’ll have the funds deposited in your account within 2-10 days. Additionally, you can apply online from the comfort of your home or workplace without needing to visit a traditional bank.
  • No SSN required: You can qualify for a business loan even if you only have an ITIN and don’t have a Social Security Number.
  • Limited restrictions on how you use the funds: Our loan restrictions are minimal so you can use funds to meet any of your business’s needs.
  • Pay off the loan early: We don’t charge prepayment penalties when you pay off your loan in full before the term ends.
  • No Credit History Required: We understand some borrowers haven’t established a credit history because they recently moved to the US. Therefore, other lenders bypass them as potential borrowers.
  • Bilingual customer service: Our loan representatives speak both English and Spanish and are trained to offer the best financing options for your business. They will make sure to match you with the perfect financing solution that can help you meet your goals without stressing your finances due to excessive monthly payments or a very long loan term. 
  • Resources and benefits: As a Camino member, you receive exclusive access to educational resources to improve your finances. You’ll receive other benefits like discount coupons and free webinars.

We recommend that you apply for a business loan today and reap the numerous rewards of working with a family-oriented business. Submitting your application won’t affect your credit. When you get a loan with Camino Financial, we help you achieve long-term financial success and build long-term partnerships.



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