Secured Vs. Unsecured Business Loans

The difference between secured and unsecured business loans can be summed up in a single word: collateral.

Lenders want to be sure to get their money back therefore their highest priority is to make sure they mitigate their risk as much as possible. For a secured business loan, a borrower pledges a valuable business or personal asset — such as real estate, business equipment, a vehicle, inventory or accounts receivable — as collateral. The collateral lowers the lender’s risk of losing money because it can sell the asset for cash if a borrower defaults on a loan.