An unsecured business loan is a loan that does not require any physical asset or collateral to obtain financial aid, unlike a secured loan where the borrower needs to have a physical asset like inventory, equipment or real estate kept as collateral against the loan obtained.
Even if there is no security help in unsecured loans, these loans are backed by a personal guarantee or a U.S. Uniform Commercial Code (UCC) lien.
If the loan is obtained through a personal guarantee, the borrower is personally responsible to repay the loan and if the loan is not repaid, the lender has the right to seize your personal assets to recover the loan.
If your business loan is backed by a UCC lien, the lender has the right to seize your business assets if the business defaults on the loan.
In UCC liens, lenders usually submit them to your secretary of state’s office after the loan agreement is signed between you and the lender.
While filing the lien with the secretary of state’s office, the lender has an option to file against a specific business asset or file a blanket lien that will give the right to the lender to seize any of the business assets if you default on the loan.