How Unsecured Business Loans Work

A type of credit backed and issued by the debtor company’s creditworthiness rather than by a type of collateral is referred to as unsecured business loans. This is as simple as it gets. No more complications and unnecessary whatnots. However, a good businessman always wants to get into the core of things. The surface is never enough. So if you are thinking about taking on an unsecured loan for your company, you’ve come to the right place. Allow us to introduce them to you a little more.

For most cases, getting a loan from any provider will always require a type of collateral. Oftentimes, this is a real estate property but can be any other valuable asset no less. These are what you call secured business loans (SBL). Financial institutions will hold on to such collateral as a form of security or guarantee for the risks they take. Should the borrower default or become delinquent, the property is seized and foreclosed.

business financeWith unsecured business loans (UBL), such collateral is not required as already mentioned earlier. Creditworthiness is used instead. This poses bigger risks to the financial institutions which is why they may impose stricter requirements to borrowing companies. For instance, the interest rates could be higher. This is not always the case and will still vary depending on the lender and their terms. Moreover, one of the necessities of the application process is the company’s credit score and history to which their creditworthiness will be gauged.

An establishment that has a good or better yet a sterling credit score is more likely to get a quick approval and release of funds. These are companies whose credit history show that they have been good debtors to their creditors with payments sent on time and no obligations forsaken or avoided.

How about those that don’t have a ravishing record then? Are they barred from the service? Not exactly, although their application may not come through as quick. They can still garner an approval but don’t get your chances quite as high. Be realistic too. As entrepreneurs, you have to be.

Now, the main advantage of unsecured business loans is simple: the absence of collateral. With this, companies can rest assure that a property foreclosure is not a threat even if signs show that the organization can fully and timely comply with its obligations. Furthermore, in the event of an insolvency, unsecured loans are more likely to be written off than their secured counterparts.


365 Business Finance: Common Budget Pitfalls for Entrepreneurs

business-financeWe all know very well that a financial plan is a key ingredient to ensuring that the business goals and endeavors are met efficiently, effectively and timely. It helps promote the proper use and allocation of available resources to maximize their benefits and stir clear of wastage. Unfortunately, many business owners still fall to the common budget pitfalls. What they are and how to avoid them are discussed below with the help of the team from 365 Business Finance.

Pitfall: Setting impractical and unrealistic expectations

When it comes to business, optimism is important and so is persistence and hard work. There is nothing wrong about aiming high but see to it that you do not overdo it. Do not set up your financial plan too high that it becomes impossible to achieve. That will only lead to frustration. Aim for a challenging one instead. Don’t lower it down too much either as that gives room for slack.

Pitfall: Not working with the right team

Creating a budget is not a single person’s job. Businesses are composed of varying divisions and departments. Each one has their own needs and allocations to provide for. This makes it necessary to not only have the right budget professionals but also key employees from the various divisions and departments to congregate and brain storm.

Pitfall: No follow through

You cannot create a plan, perform it and then not look back. You need to have a follow through, an examination and an analysis to check if the budget has indeed been effective and if slipups have occurred. This will help contribute to improvement in the future.

Pitfall: Failure to put details and specifics

You have to be as specific as possible. Think through your expenditure items and try not to miss anything. Examine what regular transactions transpire within your business and categorize them accordingly. This way, you get a better vision of what the entity’s needs and how much. Of course, the expenses in the previous periods will not be exactly the same for those to come but they will give you a pretty good idea on where to start.

Pitfall: Copying others work or that of the previous year’s budget

According to 365 Business Finance, many entrepreneurs simply repeat the previous year’s budget or worse copy that of a similar entity’s. Don’t. Keep in mind that what works for others will not work for everyone. Each company differs. Plus, consider every period as a new one. The prices of raw materials change. Sales can go up or down too so your needs will also vary every period.