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.

Our top pick: LoanBuilder, A PayPal Service Business Loans

  • Min. Credit Score Required: 550
  • Min. Loan Amount: $5,000
  • Max. Loan Amount: $500,000
  • APR:
  • Requirements: Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
  • Simple online application
  • Quick approval decisions
  • Fast funding

Our top pick: LoanBuilder, A PayPal Service Business Loans

Customizable loans with no origination fee for business owners in a hurry.

  • Min. Credit Score Required: 550
  • Min. Loan Amount: $5,000
  • Max. Loan Amount: $500,000
  • Requirements: Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
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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
Go to Excel Capital Management, Inc.'s site
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 $500,000
Go to Lending Club's site
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
Go to Main Street Finance Group, LLC's site
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
Go to National Business Capital Inc.'s site
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
Go to OnDeck Capital's site
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
Go to Kabbage Inc.'s site
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

Updated May 21st, 2019
Name Product Filter Values Min. Amount Max. Amount Requirements
$5,000
$500,000
Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
Customizable loans with no origination fee for business owners in a hurry.
$5,000
$500,000
600+ personal credit score, 1+ years in business, $100,000+ annual revenue
A leading online business lender offering flexible financing at competitive fixed rates.
$10,000
$5,000,000
Your company must have been in business for at least 6 months and have an annual revenue of at least $100,000.
Get a large business loan to cover your financing needs, no matter what the purpose is. Startups welcome with 680+ credit score.
$500
$250,000
1+ years in business, $50,000+ annual revenue or $4,200+ monthly revenue over last 3 months
A simple, convenient online application could securely get the funds you need to grow your business.
$5,000
$250,000
6+ months in business, $180K annual business revenue, 500+ credit $15K+ in monthly deposits
Funding to cover business expenses with daily or weekly repayments.
$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+.
Submit one simple application to potentially get offers from a network of over 75 legit business lenders.
Varies by lender and type of financing
Varies by lender and type of financing
Varies by lender, but many require good personal credit, minimum annual revenue and minimum time in business
Multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.

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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