RECOURSE LOANS VS NON RECOURSE LOANS: KNOWING THE DIFFERENCE
Recourse and nonrecourse loans allow lenders to lay claim to assets if borrowers default on their obligations and fail to repay their debts. Lenders are allowed to take possession of any assets used as collateral to secure these loans. Many loans are taken out with one or more assets of a certain value that the lender can take if the borrower does not fulfill their obligation as outlined in the loan agreement.
The primary difference between the two is that a recourse loan favors the lender, while a non-recourse loan benefits the borrower. So the distinction between recourse loans and non-recourse loans comes into play if money is still owed on the debt after the collateral is sold. Recourse loans allow lenders to go after other assets owned by the borrower if there’s still a balance remaining after the collateral is collected. Lenders of non-recourse loans, on the other hand, are prohibited from going after a borrower’s other assets even if there’s an outstanding balance after the collateral is sold.
What is an unsecured business loan?
An unsecured business loan is a form of commercial financing that is not backed by specific collateral. Without collateral securing the loan, the lender takes on more risk. If you don’t pay your debt, the lender cannot seize specific assets to recoup the loss. Because of this increased risk to the lender, you may receive a high interest rate. The lender may also have strict borrower requirements to weed out low-quality applicants.
PERSONAL GUARANTY, UCC LIEN MAY BE REQUIRED
Though these business loans are considered unsecured, they may be secured with something other than collateral. A personal guaranty is a common requirement for unsecured financing. Signing a personal guaranty puts you on the hook to personally repay the loan if your business defaults on payments.
A lender may also place a general blanket lien on all of your business assets. With a general lien in place, the entirety of your business assets becomes collateral. Although you may seek an unsecured business loan to avoid offering collateral, you could still risk losing your assets if the lender requires a general lien to secure the funding.
How to Apply for Unsecured Business Funding and Non-Recourse Loan
Getting access to working capital fast is often a key factor for business survival and growth. So we created a unique way of raising financing — and it takes just 2 minutes to apply online. We handle the grunt work to get your business approved and funded in as little as 24 hours.
Here is a complete look at how our simple lending process works:
Step 1: Know how much funds you want to borrow
From a business standpoint, we suggest jotting down a list of expenses you expect to pay for in the near future. This can include rent for office space, employee salaries, equipment needs, etc. Add those expenses up to get a ballpark estimate on how much financing you truly need.
Step 2: Contact our consultant online and apply
It couldn’t get easier than this. Our online application is three quick steps. There a reason we’re rated 5/5 on Trustpilot and Google reviews. We take ease of funding and quick approval times seriously.
Step 3: Keep a few recent bank statements handy
You get a dedicated lending advisor assigned to you the second you apply online. We reach out to you right away to understand your specific financing needs and answer any questions you may have. Your advisor takes care of all your paperwork, you don’t have to lift a finger.
Step 4: Get funded!
The money is wired to your bank account in as little as 24 hours. We treat you like family and want to see you success, so we’re always available when your business demands more capital in the future.