Secured vs. unsecured business loans | Should you put up collateral?

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.

OnDeck Small Business Loans

OnDeck Small Business Loans

Among the largest online business lenders offering term loans and lines of credit at competitive fixed rates.

  • Minimum Amount: $5,000
  • Maximum Amount: 500000
  • Loan Term: 3 to 36 months
  • Simple online application process with fast decisions
  • Dedicated loan specialists and loyalty benefits
  • Must have been in business for at least one year with annual revenue of $100,000+
  • Must have a personal credit score of 500+

    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

    ProviderUnsecured Loans Offered?Secured Loans Offered?Collateral RequiredOffer Details
    Excel Capital ManagementGreen checkmak IconGreen checkmak IconReceivables 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
    LendingClubGreen checkmak IconGreen checkmak IconUCC lien on business assets is required for loans over $100,000Peer-to-peer lender offering small business loans up to $300,000
    Main Street Finance GroupGreen checkmak IconGreen checkmak IconAssets (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
    FundboxGreen checkmak IconRed Cross IconNoneLines of credit and invoice financing with a max draw limit of $100,000
    National Business CapitalGreen checkmak IconRed Cross IconNoneBusiness equipment financing and leasing services, lines of credit, and small business loans with a max financing amount of $5,000,000
    FastPayGreen checkmak IconRed Cross IconNoneInvoice financing for digital media companies
    PayPal Working CapitalGreen checkmak IconRed Cross IconNoneShort-term loans giving e-commerce businesses up to a 25% advance on future PayPal sales or up to $97,000
    SnapCapGreen checkmak IconRed Cross IconNoneTerm loans, working capital, expansion and inventory loans with a max draw amount of $600,000
    OnDeckRed Cross IconGreen 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
    KabbageRed Cross IconGreen 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
    AccionRed Cross IconGreen checkmak IconPersonal guaranteeMicroloans for small businesses with a max amount of $250,000
    BlueVineRed Cross IconGreen checkmak Icon
    • General lien on business assets
    • Personal guarantee
    Lines of credit and invoice financing with a max amount of $2,500,000
    FundationRed Cross IconGreen checkmak Icon
    • Personal guarantee
    • UCC-1 on business assets
    Lines of credit and business term loans with a max amount of $500,000
    Funding CircleRed Cross IconGreen 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 June 19th, 2018
    Name Product Product Description Min Loan Amount Max. Loan Amount Requirements
    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.
    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.
    Must have been in business for at least one year with annual revenue of $100K+. Must have a personal credit score of 500+.
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans with no origination fee for business owners in a hurry.
    Annual business revenue of at least $42,000, at least 9 months in business, personal credit score of 550+.
    Kabbage Small Business Line of Credit
    A simple, convenient online application could securely get the funds you need to grow your business.
    Must have been in business for at least 1 year. Revenue minimum is $50,000 annually or $4,200 per month over the last 3 months.
    Lending Express Business Loan Marketplace
    Lending Express Business Loan Marketplace
    At least 3 months in business and $10,000+ in monthly revenue. Your business might also qualify it has at least 6 months in business and $2,000+ in monthly revenue.
    National Business Capital Business Loans
    Get a large business loan to cover your financing needs, no matter what the purpose is. Startups welcome with 680+ credit score.
    Your company must have been in business for at least 6 months and have an annual revenue of at least $180,000.
    Fora Financial Business Loans
    No minimum credit score requirement and early repayment discounts for qualifying borrowers.
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.
    Excel Capital Management Small Business Loans
    Get personalized financing options that suit your unique business needs in just a few simple steps.
    Varies by loan type
    Varies by loan type
    Your business must operate in the US, be at least 1 year old and have monthly revenue of $15,000+.
    Balboa Capital Small Business Loan
    Short-term business financing with no minimum credit score or physical paperwork required.
    Must make $100,000 in annual revenue and be established for at least one year prior.
    LendingTree Business Loans
    Compare 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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