Secured vs unsecured business loans | finder.com

Compare secured vs. unsecured business loans

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Not sure if a secured or unsecured business loan is more suited for your company’s needs? Find out here.

If you’ve decided to apply for financing for your business, finding the right type of loan is an important next step. There’s a range of financing options available, but two of the most common business loan types are secured and unsecured loans. Read further to see how these two loans compare and which is best for your business.

LoanBuilder, A PayPal Service Business Loans

Our top pick: LoanBuilder, A PayPal Service

Customizable business loans with no hidden fees.

  • Min. Amount: $5,000
  • Max. Amount: $500,000
  • One-time fixed fee charged over the life of the loan
  • Acclaimed customer service
  • Requirements: $100,000+ annual revenue, 1+ years in business, 600+ personal credit score

    What is the difference between secured and unsecured business loans?

    The key difference between secured and unsecured business loans is the guarantee that is required — secured business loans require you to have assets, whether they be business or personal, to attach to the loan, while unsecured business loans do not.

    Secured business loans are typically offered by banks and can help a business access larger amounts. This is because lenders are taking on less of a risk if they know they can recoup their losses should the loan not be repaid. Unsecured business loans tend to come with lower loan amounts and higher rates as the loan is more of a risk.

    Secured and unsecured business loans you can compare

    Provider Unsecured Loans Offered? Secured Loans Offered? Collateral Required Offer Details
    Excel Capital Management Green checkmak Icon Green checkmak Icon Receivables or assets (commercial real estate, inventory or heavy equipment) Loan options including split funding, term loans, equipment financing, invoice factoring, business lines of credit and more
    LendingClub Green checkmak Icon Green checkmak Icon UCC lien on business assets is required for loans over $100,000 Peer-to-peer lender offering small business loans up to $300,000
    Main Street Finance Group Green checkmak Icon Green checkmak Icon Assets (commercial real estate, inventory or heavy equipment) Business financing up to $1,000,000 through merchant cash advances, long-term unsecured loans, equipment financing, and lines of credit
    Fundbox Green checkmak Icon Red Cross Icon None Lines of credit and invoice financing with a max draw limit of $100,000
    National Business Capital Green checkmak Icon Red Cross Icon None Business equipment financing and leasing services, lines of credit, and small business loans with a max financing amount of $5,000,000
    FastPay Green checkmak Icon Red Cross Icon None Invoice financing for digital media companies
    PayPal Working Capital Green checkmak Icon Red Cross Icon None Short-term loans giving e-commerce businesses up to a 25% advance on future PayPal sales or up to $97,000
    SnapCap Green checkmak Icon Red Cross Icon None Term loans, working capital, expansion and inventory loans with a max draw amount of $600,000
    OnDeck Red Cross Icon Green checkmak Icon
    • General lien on business assets
    • Personal guarantee
    Term loans up to $100,000 and lines of credit with a max draw amount of $500,000
    Kabbage Red Cross Icon Green checkmak Icon
    • Personal Guarantee
    • General lien on your business assets (in certain cases only)
    Lines of credit with a max draw amount of $250,000
    Accion Red Cross Icon Green checkmak Icon Personal guarantee Microloans for small businesses with a max amount of $250,000
    BlueVine Red Cross Icon Green checkmak Icon
    • General lien on business assets
    • Personal guarantee
    Lines of credit and invoice financing with a max amount of $2,500,000
    Fundation Red Cross Icon Green checkmak Icon
    • Personal guarantee
    • UCC-1 on business assets
    Lines of credit and business term loans with a max amount of $500,000
    Funding Circle Red Cross Icon Green checkmak Icon
    • Lien on business assets
    • Personal guarantee from primary business owners
    Peer-to-peer lender offering fixed-term business loans with a max amount of $500,000

    What is a personal guarantee?

    A personal guarantee is a legally bound promise that the borrower will repay the loan with personal funds if the business fails. Keep in mind most business lenders require a personal guarantee to protect them against major losses if you default.

    You may also often see a general lien requirement. A general lien is a lender’s right to keep your business assets in the event you’re unable to repay the loan.

    What is considered a valuable asset for security?

    When you’re borrowing against your assets, your loan is secured by the residual value that your assets represent. If you’re unable to repay the loan, the lender may seize your assets to cover the outstanding amount. Any of the following could be used as security:

    • Personal or commercial real estate
    • Vehicles
    • Business equipment
    • Investment accounts

    You can also borrow against the valuation of your business as a whole.

    25+ types of collateral you can use to secure different types loans

    Is an unsecured or secured loan best for my business?

    A secured business loan may be a good option for you if:
    • You’re looking to borrow a large amount of money over $1 million.
    • You have several assets you can secure the loan against.
    • You are in a position to make repayments over a long period of time.

    You can usually find secured business loans from banks and lenders that offer SBA loans, but some alternative business lenders also offer secured loan options as well.

    You may want to consider an unsecured business loan if:

    • You have a small- to medium-sized business with few or no valuable assets.
    • Your business is established and has growing monthly revenue.
    • You need a quick cash injection.
    • You can repay the loan over a period of one to five years.

    Many lenders offer unsecured business loans, though you’ll likely need to meet stricter eligibility requirements because the lender is taking on more risks. As a minimum, you’ll generally need to be in business for at least a year and have monthly revenue of at least $10,000.

    Compare top business loan providers

    Rates last updated October 22nd, 2018
    Unfortunately, none of the business loan providers currently offer loans for these criteria.
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    $5,000
    $500,000
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Credibly Business Loans
    Funding to cover business expenses with daily or weekly repayments.
    $5,000
    $250,000
    At least 6 months in business, average $10,000 in monthly deposits.
    Lendio Business Loan Marketplace
    Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
    $500
    $5,000,000
    Must operate a business in the US or Canada, have a business bank account and have a personal credit score of 560+.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    2+ years in business; $50,000+ in yearly sales; No bankruptcies or tax liens; At least 20% ownership of your business; Fair or better personal credit
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    $5,000
    $500,000
    Must have been in business for at least one year with annual revenue of $100K+. Must have a personal credit score of 500+.
    Lending Express Business Loan Marketplace
    $5,000
    $500,000
    At least 3 months in business and $10,000+ in monthly revenue. Your business might also qualify if it's been in business at least 6 months with $3,000+ in monthly revenue.
    Fora Financial Business Loans
    No minimum credit score requirement and early repayment discounts for qualifying borrowers.
    $5,000
    $500,000
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.
    LendingTree Business Loans
    Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.

    Compare up to 4 providers

    Bottom line

    There isn’t one right loan solution for all businesses. By comparing your options and weighing up the pros and cons of each, you can find what’s right for your business.

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