An unsecured loan is where by the lender does not take any security, basically, they lend to you based on the past performance of your business or the potential performance of your business going forward. This means that they are unable to recoup their funds should you not make payments and for this additional risk they actually charge a premium on the interest rates.
A secure loan is basically when you provide some sort of asset to the lender, so that in the event where you fail to make repayments to them, they are able to obtain that asset to sell it off to recoup their funds. Assets that can typically be used as security include but are not limited to cars, trucks, dentist chairs, some certain assets within certain industries, like ovens for restaurants, it can even include your home or commercial premises. By providing an asset, lenders are more comfortable with the security position. Hence they’re able to lend you at a lower interest rate.
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