Choosing the right loan for your business can be daunting. It is essential to consider your options. Be sure you collaborate with a finance broker, ideally in conjunction with an accountant, before considering any finance solution.Many businesses in Australia will weigh up secured vs unsecured loans. Read more for an overview of both loan types.
Ask your broker to speak to one of Aquamore’s expert team members for further information about our fast, flexible funding.
The Difference Between Secured and Unsecured Loans
Here are some of the core differences between a secured and unsecured loan:
- Secured lending: A secured loan requires the borrower to provide collateral (usually real estate) to obtain the loan. This is so the lender can acquire assets if the loan defaults.
- Unsecured lending: An unsecured loan does not require the borrower to provide collateral to obtain the loan. Consequently, rates are usually much higher and the amounts able to be borrower are lower, due to the greater risk to the lender.
Below, we explain the financial solutions in further detail. But remember, be sure to have your broker contact us for additional clarification.
What is Secured Finance?
Secured business loans requires the borrower to provide collateral (usually real estate) to obtain the loan. This may also be called asset security, or asset-backed lending.
The collateral required to secure a loan varies from lender to lender, but commonly includes:
- Real estate such as a commercial or residential property
- Vehicles such as trucks, vans, or specialised agricultural machinery
- Equipment such as computers or office furniture
- Financial instruments such as savings accounts or term deposits
The loan to value ratio, the loan term and amount varies between lenders.
Aquamore is renowned for providing fast secured loans between $300K and $7.5 million.
The application process is simple and the company reviews every application on its on merit – even if a business has a poor credit rating.
The Pros and Cons of Secured Business Loans
Secured loans are a common loan source. Some of the advantages include:
- Lower interest rates
- Some lenders, like Aquamore, considers applications from business borrowers with limited or affected credit history
- Fast application process with quick approvals for aligned borrowers
Conversely, the failure to meet repayments may result in the loss of important asset, such as property.
What is Unsecured Finance?
An unsecured loan does not require the borrower to provide collateral to obtain the loan, though typically, lenders will expect a good credit rating and demonstration that the business is not in distress.
An unsecured business loan is often preferred by businesses who need quick access to a cash lump sum.
The Pros and Cons of Unsecured Loans
This type of loan may benefit some businesses, such as ones looking for a small amount without the risk of losing important assets. The main benefits to expect are:
- No reliance on collateral to gain approval for the loan
- Quick and easy process for access to a cash lump sum
- Flexible repayments and interest rate.
- A good credit history will streamline an application
Conversely, a poor credit rating may stop access to this loan type. Unsecured loan sizes are usually less than a secured loan, and often have higher interest rates. However, if you lack assets but have an excellent credit rating, this type of lending may suit. Again, discuss your options with your finance broker.
The Types of Secured and Unsecured Loans
What are the types of secured vs unsecured finance? Breaking this down, let us start with secured loans. Examples may include:
- Home equity
- Homeownership
- Mortgages
- Second mortgages
- Debt consolidation
Types of unsecured loans may include:
- Personal
- Credit cards
- Student
- Line of credit
Keep in mind that these are just a few examples and that there are many different types of funding available.
Which is the Right Loan for Your Business?
When considering a secured loan vs unsecured loan, the most suitable financial solution depends on individual business circumstances. Keep in mind what you are looking for and weigh up your options.
- Secured loans: May be suitable for small businesses with assets and/or have a bad credit rating. It can provide a large cash lump sum, with quick approvals.
- Unsecured loans: May be suitable if lacking collateral or in need of a fast cash injection minus the need for asset appraisal. Credit history is not as important, but funds released are typically lower.
In any case, consult with your finance broker when considering any finance facility.
Aquamore Can Guide You to a Suitable Loan
Since 2016 we have provided Australian businesses with commercial financial solutions. With a nationwide team offering fast and efficient support, we offer:
- Flexibility: Each loan is viewed holistically. Aquamore is renowned with providing flexible funding solutions that aligns with the businesses individual circumstances
- Easy process: Aquamore has a straight-forward approval process and provides funding quickly to aligned applicants
- Access to substantial funds: Aquamore provides businesses loans from $300K – $7.5 million to support growth.
Your finance broker can start the application now:
