Getting a secured or unsecured small business loan really depends on your current business needs and financial situation as well as the type of funder that is going to provide your business with the working capital. A secured business loan is when the lender takes an interest in the business’s collateral, which typically means that the lender will file a UCC financing statement as to the business collateral. For an unsecured business loan, the lender does not take an interest in the collateral and does not file a UCC financing statement. In general terms, an unsecured loan reduces possible risks for the borrower, however, often times will not offer such competitive terms. Secured loans, are generally a better option for many businesses as it helps reduce the cost of funds which can also help increase the amount of financing. Other factors to consider are that specific collateral (specific to those of real estate, inventory, or other specific assets) can help increase the financing even more; however, they can take much longer for the loan to be processed and approved. At Rapid Finance, our secured loans are a great option for small business financing as the application process is still quick and easy.
A UCC financing statement is a document filed with the secretary of state by the lender proving you financing. The UCC puts other lenders on notice that your lender has a security interest in your business collateral. The UCC will be filed in a state where your business operates or a state where the business has collateral. Once the small business loan has been paid in full, and there are no other outstanding loans with the lender (i.e. any renewal loans or another separate loan), the lender will terminate the UCC.