Curious about the financial backbone of small businesses? Wondering whether small business loans are secured or unsecured? Whether you're new to the entrepreneurial scene or a seasoned business pro eyeing expansion, grasping the nuances of secured and unsecured loans is vital for smart financial maneuvering. 

Secured Loans:

What are they? Secured loans are backed by collateral, which is something of value that you pledge to the lender as security against the loan. This collateral could be your business assets, equipment, inventory, or even personal assets like your home or car.

• Pros: Because secured loans are less risky for lenders (they have something to fall back on if you default), they often come with lower interest rates and higher borrowing limits. Plus, they can be easier to qualify for, especially if your credit history isn't squeaky clean.
• Cons: The downside? If you fail to repay the loan, the lender can seize your collateral to recoup their losses. So, there's a lot at ...

You may be facing a choice between applying for an unsecured working capital loan or a conventional bank loan, and weighing the pros and cons. If so, then one of the key aspects you definitely want to analyze is collateral.

Why Banks Demand Collateral

As you may know, banks offset the risk of lending onto borrowers by demanding that they collateralize the loan with assets such as property, vehicles, equipment, securities and so on.

However, an extremely important point that some business owners aren’t aware of when they apply for a collateralized small business loan from their bank, is that they might not see eye-to-eye on certain aspects. Specifically, there are 3 common stumbling blocks that many business owners trip over -- and often through no fault of their own:

1. Disagreements on an asset value.

If you’ve ever shopped for a home, a used car (or even sometimes a new one!), or any other “big ticket” item, you’re aware that prices can vary; and often considerably. Well, when...