Everything you need to know about an unsecured working capital loan

An unsecured working capital loan can provide your business with the funding needed to get you through a rough patch or grow to your next stage of development. When you apply for this type of small business loan, you can take advantage of several benefits. Learn more to find out if an unsecured working capital loan could be the right financing solution for your company.

No Collateral Required

An unsecured loan means that you don’t need any collateral to qualify. This is beneficial in a couple of different ways when compared to a secured loan. One way a secured loan works is to use some type of business equipment as collateral for the loan. Not only does this put you at risk of losing that equipment if you default on the loan, but banks also oftentimes undervalue your physical assets. That can either limit how much you can borrow or put more of your equipment at risk if it’s all used as collateral.

The other type of collateral you can use is financial assets, like a savings account. While you don’t have to worry about the value, you do have to worry about losing your money if the loan goes unpaid. If you use a personal retirement account, for example, you could jeopardize your future retirement plans with the loan.

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Fixed Interest Rates

Generally speaking, an unsecured working capital loan should come with a fixed interest rate. This goes a long way in ensuring sound financial planning for your business. You don’t have to worry about volatile interest rates that change on a regular basis. Plus, rates are only expected to go up over time. Once you lock in your interest rate, you’ll know exactly what your payment is going to be for the entire length of the term.

Whether your working capital loan is scheduled to last 6 months or 24 months, you can plan ahead to ensure you can make your monthly payments.

Flexible Use of Funds

A final benefit of getting an unsecured working capital loan for your business is that you can use it for just about anything related to your company. You could use it to mitigate short-term cash flow issues or invest in new technology or equipment. You can even use the funds for growth opportunities.

With so much flexibility for all aspects involved in the process, a working capital loan can help prepare you for planned expenses or unexpected ones.