07 Jun Ask yourself these questions before deciding to Apply for a Business loan
Generally, this is required for approval of a business loan. If you're unsure as to what security would pass as collateral, then inquire at the lending institutions you are applying through. Usually, it would be any form of large assets, property or vehicle. If your taking out a personal loan to start a business, you would typically secure the loan against your home loan or, equity in your property.
Lenders require this to alleviate the risk that they take on when lending you this loan. Bear in mind, this isn't a quick cash loan or a payday loan, this is ordinarily a large sum of money over an extended period of time, therefore banks and other lenders need to be prepared for the fact that individuals' financial situations can drastically change in this time, rendering them unable to afford the repayments. In this unfortunate circumstance, the collateral saves you from losing your business and it spares the bank any losses.
If you're quite a small business and in need of a smaller business loan than normal, for example, to do some minor renovations or otherwise procure a few machines for the business, then security isn't always required. The only difference is that unsecured loans come with higher interest rates, naturally.
1. Do I really need a loan and why?
If you ask yourself this question and come back with answers that are suitably matched for a business loan, such as poor cash flow, renovations, expansion, new stock, then you can rest easy that you're making the right call in applying for a loan. However, if your answer is more along the lines or inefficiency has led to poor productivity and your ount of finance is going to sort your problem out.