A business loan unsecured is an business loan that requires no collateral and is mostly used by small businesses to build working capital, the money needed to start and maintain a business. Because these loans are not backed by collateral, the lending institution relies on the borrower’s signed promise to pay back the loan. Even though the borrower faces no material consequences for failure to repay the funds, his or her credit can be negatively impacted.
An unsecured business loan typically helps a business establish or increase working capital, purchase equipment and inventory, and assist with accounts receivables and debt. Unsecured loan amounts usually range from fifty to one hundred thousand dollars, with much higher interest rates compared to secured loans (loans that require collateral). Lending institutions charge higher interest for unsecured loans because they have a higher risk of not being repaid.
One way to combat the high interest rates charged by lending agencies for unsecured loans is to obtain a 7(a) loan from the Small Business Administration. This loan program guarantees a certain portion of the unsecured loan, which alleviates some of the risk the lending institution, resulting in a lowered interest rate. The 7(a) loan is available to business owners who need capital to fund construction, supplies, and equipment. Overall, an unsecured business loan produces little profit, but can help business owners obtain the start-up capital to maintain a new business.
Buying out partner funding is needed when one owner of a business buys another business owner’s shares or property within the business. Partners may decide to sell their stock in the business if they are moving, retiring, or otherwise can no longer be a part of the business. While most financial companies do not provide loans specifically for buying out a partner, they do offer loans that can be used for any business purpose.
Loans from a lending institution are one source of buying out partner funding. Common requirements to apply for a loan include supplying personal and business financial documents, credit reports, and a business plan. If an applicant has done business with a lender before, these requirements may be waived or reduced. Businesses can secure better interest rates if their credit history is stable and if they choose a secured loan, which uses personal or business assets as collateral to back up the loan. Unsecured loans and loans provided by non-traditional lenders usually have higher interest rates because they put the provider at a higher risk.
Another option for buying out partner funding is factoring. Factoring allows a business to obtain immediate funding by selling its accounts receivables to another company, called a factor. A majority of factors require businesses to process credit cards and to have been doing so for a specific length of time. Once approved, the factor collects the payments to the credit accounts until the funds are replenished.