Menu
Apply Now
nnnApply Now
17
September
2019

Secured Business Loans: 5 Drawbacks To Know About Traditional Bank Loans

Business Funding - 2 Min Read

If you’re considering a secured business loan, it’s important to weigh the positives and negatives before you make a decision.

First, let’s get into the primary differences of the two loan types…

What is a Secured Business Loan?

A secured business loan is business financing that’s “secured” by some type of collateral. This collateral becomes a secured debt owed to the creditor who gives the loan.

What is an Unsecured Business Loan?

An unsecured business loan is a funding solution that requires no collateral or personal business assets. If you default on the loan, the lender can’t automatically seize your property. 

5 Possible Drawbacks to a Secured Loan for Your Business

Many business owners opt for an unsecured business loan instead of a secured loan. Even though they could get either, the drawbacks sometimes outweigh the benefits. These drawbacks include:

1. You may have to pay an extra fee to have your collateral evaluated, which would drive up your total cost of borrowing.

2. Banks and credit unions often under-value your collateral. This means that you may have to pledge more assets than you would with an unsecured business loan.

3. The approval process could be lengthy, often taking months to be processed. And often, without any guarantee of approval.

4. Along with taking longer, the amount of paperwork for a secured business loan is more significant than an unsecured loan. Many small and mid-sized business owners simply can’t afford the time needed to pull together the comprehensive paperwork needed to process a secured business loan.

5. If you don’t have enough business assets required (or, more likely, if your assets are under-valued), you may be required to pledge personal assets such as your home and car, which can be scary for small business owners.

We’re not saying that secured business loans are dangerous and should be avoided. Often times, the terms could be far better than an unsecured. However, if you feel that there’s a chance you may not be approved from a bank or credit unit, and therefore are hesitant to invest the time, an unsecured business loan could be a great alternative option for you.

Learn More

If you are one of those businesses unsure of whether you would be able to get approval from a bank or credit union, Mulligan Funding would love to speak with you. We work with you to review your situation and offer a long-term lending plan to help set you and your business up for success. Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.

Move your business forward, today.

Request a FREE Quote.

404

Sorry, an error occurred.

This form is not available.

Speak with one of our funding consultants or call us directly at 855-326-3564

Related Articles

See More
  • 26
    February 2021
    Business Funding

    5 Reasons To Avoid Co-Mingling Personal and Business Funds

    This blog post was last updated on February 26, 2021. Are you thinking about using your personal funds for growing your business? We all know how it goes - you swear that you’ll repay it in a few months when business is stronger, but even with the best intentions, it’s not always possible to foresee changing circumstances that might make that impossible. It can be safer for your personal finances if you avoid co-mingling personal and business funds altogether. Your bank account isn’t an endless source of capital, and your personal finances may suffer if you don’t maintain clear boundaries between your business and personal accounts. Still not convinced? Here are five reasons you may want to keep your personal funding sources separate: 1. Lost Savings We all have dreams, and our savings help us accomplish them. Whether you’re dreaming of financial independence or owning a beach house, co-mingling personal and business funds could mean that your savings diminish and

  • 15
    February 2021
    Business Funding

    Business Funding: Finding the Best Financing Options for Your Business

    This blog was last updated on February 15, 2021. Business funding is essential for most business owners at some point in their growth. But finding the right lender and loan package for your specific situation isn’t always easy. How important is it to have a lending source that you can trust and count on to be there when you need them? Cash flow challenges are common in the business world and are one of the top reasons small businesses fail. You may know that 82 percent of small businesses that fail have experienced cash flow issues. That’s an alarming statistic for any business owner to digest. The good news is that there are numerous financing options for your business. The key is finding a lending source you can count on to be there when you need them with a loan program that’s flexible enough to meet your needs. This guide covers multiple business funding options available to business owners. It

  • 12
    February 2021
    Business Funding

    Long-Term vs. Short-Term Business Financing: Which is Right for Your Business?

    This blog was last updated on February 12, 2021. Looking for financing for your business’ next growth opportunity, as a cash bridge, or for your new location’s lease? Whatever the reason, you’re probably faced with financing options from multiple directions and wondering how to choose the right one for your business. One of the biggest questions that business owners have about financing is whether long-term or short-term financing is a better option for their business. As the name suggests, these term loans largely differ in the overall lifespan, but there are other factors to consider as well. Each type of financing has its place, but in a nutshell, here are the differences between the two financing types: (more…)