Secured vs. Unsecured Business
Term Loans: Which Fits Your Plan?
Income & FICO at a glance (typical ranges, vary by lender):
Secured Term Loan: FICO 620+; monthly revenue $10k–$25k+ depending on collateral value; time-in-business 6–24 months. Requires collateral (equipment, vehicles, real estate, or other business assets).
Unsecured Term Loan: FICO 660–700+ preferred; stronger cash-flow and consistent deposits help; time-in-business 12–24 months common. No specific collateral pledged.
Key Differences
Collateral: Secured loans are backed by assets; unsecured loans are not.
Rates & Amounts: Secured loans often offer lower rates and larger limits because the lender has collateral. Unsecured loans may fund faster but usually at higher rates and smaller amounts.
Documentation: Secured loans add collateral docs (titles, appraisals, UCC filings). Unsecured loans focus more on cash-flow, bank statements, credit profile, and sometimes tax returns.
Risk: With secured loans, specific assets can be at risk if you default; with unsecured loans, lenders often rely on a personal guarantee and business cash-flow tests.
Important Similarities
Fixed, predictable payments: Both offer set terms and amortization, so you know your monthly cost.
Underwriting focus: Lenders evaluate ability to repay, bank statements, average daily balances, NSFs, debt obligations, and credit history.
Use of funds: Working capital, hiring, equipment purchases, inventory, upgrades, and consolidating expensive short-term financing.
Which Should You Choose?
A Secured Term Loan: can be ideal If you have solid collateral and want the lowest possible rate and larger approval,
An Unsecured Term Loan: may fit If your strength is credit and cash-flow and you prefer to avoid pledging assets.
Not sure? We’ll review your (revenue, credit, and timeline) to match you to the right option.