Question by Amorican: What are the risks associated to an UNsecured small business loan?
I am working on starting a small business soon. I am financing a big chunk myself but need a small business loan for more than half of the start-up cost.
I have been told by different professionals out there that with my age, credit score, and years of established credit I would easily qualify for an unsecured business loan, meaning that I don’t have to put my house and other assets on the line. This is obviously a huge benefit, but aside from an APR higher than one on a secured loan, and expensive loan fees, what are the risks and downsides of an unsecured loan? Also, do you know of any financial company who offer such loans fee-free?
Serious answers only please, and thanks in advance for your help.
Best answer:
Answer by luckyaz128
I cannot believe that any legititate lending institution is going to make an un-secured loan to a start-up business. There are thousands of small business professionals out there with established businesses would kill for a un-secured loan.
But anyway, good luck with your new business.
Know better? Leave your own answer in the comments!
The biggest loop hole with unsecured loans is they will usually ask you to sign a PG – Personl Gaurantee. This means that even if the business folds you still owe the money.
This loophole is outside of the usual ‘Limited Liability’ so my advice is NEVER sign a PG in your life.
I got stung in one of my previous businesses by a partner and 4 years later I am still paying back the money even though the company doesn’t exist anymore. Since then I have made a stand and refused to sign one and it’s amazing how many businesses will be happy to put a line through it.
The issue for you is which is it going to be? No one will lend you money with no gaurantee of getting it back – would you? If you that sure of your business plan and financial projections then I suggest you back yourself and get on with the business.
Good luck!