How does a secured business loan differ from an unsecured loan?

A secured business loan requires collateral to secure the loan, which means that the lender can seize the collateral if the borrower defaults on the loan. In contrast, an unsecured loan does not require collateral, but typically has a higher interest rate and stricter eligibility requirements.

Because the lender has collateral to fall back on in case the borrower defaults, secured business loans generally have lower interest rates and more flexible repayment terms than unsecured loans. However, the borrower runs the risk of losing the collateral if they are unable to make their loan payments on time.