Unsecured financing / Unsecured debt

Unsecured financing is a loan where repayment is guaranteed only by the borrower 's valuation of.

Real estate or other valuable assets can be collateral for credit and other financing transactions. The borrower offers this as collateral. This means that if the debtor does not repay the credit, the creditor can acquire and sell the asset offered as collateral to get its money. 

In unsecured financing, the parties do not agree on collateral. Such business therefore represents a greater risks for the creditor than providing a secured loan. Thus, the interest rate of unsecured forms of financing is typically higher than that of a secured loan. This makes the transaction attractive to the creditor, despite the higher risk.

In such a case, the financier can only consider whether or not to grant a loan based on the borrower 's qualifications. It can be a consideration 

• the financial history of the borrower, 
• your existing income, 
• previous or existing loans. 

If the borrower is unable to fulfill his obligations, the creditor has no other option but to collect his claim through legal means. This can be done by entrusting the collection to a debt management company management company. But there may also be a case where the creditor initiates a civil action directly against the non-paying debtor.

During venture capital investments, the investment is typically combined with the obtaining ownership of a share. However, there are also examples of unsecured financing. The advantages of unsecured financing include that 

• can be stretched quickly, 
• flexible repayment schedule, 
• the administration is very simple, 
• thus, unsecured financing works easily even with smaller amounts.

The investor can also provide unsecured financing as a as a shareholder's loan. However, there are already solutions on the market specifically tailored to startup businesses, which are available through banks and other financial institutions.

Various crowdfunding platforms and peer-to-peer lending solutions are also considered unsecured financing solutions. At that time, the startup companies mainly target small private investors with the promotion through their own communication campaign. It often happens that the startup offers a future product that does not yet exist to potential customers. In the latter case, customers practically pay for the product in advance. In such cases, customers risk that the product may never be made or may not be suitable for them.