What’s the difference between a secured and unsecured business loan?

Some loans require ‘security’ or ‘collateral’—such as real estate or a vehicle–that the lender can claim in the event of default to recoup any losses incurred. As a borrower, having your asset or property on the line is a good incentive to make repayments on time.

A lender’s imposition of collateral depends in part on their assessment of your creditworthiness. They base these on several factors such as your business track record and credit score. So presenting a positive picture of your company and its reputation also shapes the terms of the loan that you get.