Best loan for business
One good way to determine what is the best loan for your business is breaking the need down into categories. All loans fall into unsecured or secured. Secured lending is better when a company needs a high dollar amount. Unsecured may work if the need is for a lower amount and credit is good.
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Initial categories to consider:
Unsecured versus Secured
Unsecured – This is a type of funding category that in general, most businesses would prefer to do. Unsecured funding does not require collateral. However, borrowers quickly realize that unsecured loans are the most difficult to qualify for, especially for higher amounts. There are trigger points in loan amounts. Often times requests over $50K will provoke a significant amount of increased scrutiny.
Secured – The primary question when looks at secured financing is, what security, that being collateral, do we have to offer?
In general, liquid collateral, such as certificate of deposits, or listed stocks, are the most preferred types of collateral, and most often the most preferred by commercial banks. Real estate is one of the most desired and common types of collateral taken as security.
Accounts receivables, if of the type that lenders like, is also another type of collateral that is very desired by lenders due to the fact that if the payer off the receivable is a very solid and strong company, it is almost a guarantee of receipt of funds to the lender.
However, most businesses do not have this type of asset to offer. Most do not have certificates of deposit, listed stock, or commercial real estate with high equity.
Therefore, any business should first consider what assets they have to offer. Most have equipment more than any other asset. If the equipment a company has is of the type that can be offered as security, this should be the type to be considered for a secured loan.