Why are unsecured business loans expensive?
Expensive is a relative term… Meaning it’s definition depends on the context. Is $10,000 that costs $5,000 expensive? That really depends on who is borrowing the money and what it is used for. If the merchant in this funding scenario needs the money immediately and if there are no other funding options available, is the money really expensive? What if the money will be used to net the borrower $30,000? I’d the money still perceived as expensive?
Regardless of how the money is seen as expensive in context to the borrower and potential ROI… Alternative borrowing is technically more expensive than traditional land money, simply because bank rates are cheaper.
That being said, unsecured lending is clearly more expensive because if the borrower defaults on the loan, the lender’ has limited recourse in recouping the lent monies.