Unsecured Business Loans Vs Microloans

Business financing options other than traditional banks have become very important and frequently sought-out over the past year. In fact, according to an article titled "As Credit Dries Up, More Owners Seek Microloans," many microlenders are seeing increases in inquiries, especially from those with "high credit scores and business track records."

Unsecured business loan providers have also experienced a surge in applicants over the past year, for the same reasons. Still, there are small business owners who are unaware of either of these methods of business financing, and many of those who are aware, are unsure of which method of business financing is best for them.

Microloans have been defined as, "loans granted to small and home-based business [owners] who are unable to obtain funding through regular channels (such as bank loans or investors)." Small business owners can usually receive microloans of up to $25,000.

An unsecured business loan is a form of business financing that utilizes credit card factoring and requires no collateral. Lenders evaluate a business's monthly credit card sales, advance the small business owner a particular amount of money, and accept a small percentage from the business' daily credit card sales as repayment.

Both microloans and unsecured business loans allow an alternative way for small business owners to secure funds for their businesses. They help those who have lower credit scores and shorter business track records than most banks care to deal with.

Microloans typically peak at $40,000, while unsecured business loan providers can fund a single business owner up to $500,000. Still, an unsecured business loan is based on a business's monthly credit card sales. Lenders allot funds according to the amount of credit card sales that a business processes each month. With an unsecured business loan, a borrower may only qualify to receive $5,000. Therefore, the small business owner has the potential to receive more money through the unsecured option than through a microloan, but he/she must qualify for that amount.

Unsecured business loans may be easier to get since a business owner must have only owned his/her business for at least 6 months and process a minimum of $5,000 in credit card sales to be eligible, but they are a more expensive method of business financing and should only be used by small business owners who can truly benefit.

Whether you are considering a microloan or an unsecured business loan to provide the funds needed to improve your business, it is important to do your research and make sure that you choose the method of business financing that suits you and your business best.

Unsecured Business Loan
An unsecured business loan is the collateral-free way to finance your business.