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Unsecured business loans

Cover payroll, restock inventory and more — all without putting up collateral.

Small business loans that don’t require personal or business assets are considered unsecured. And unsecured small business loans are a great option when you don’t have — or don’t want to risk — your equipment or other assets.

There are a quite a few types of unsecured business loans out there. To make the most out of your financing, here are the four top options and a few ways you can decide if unsecured loans are the right choice for your small business.

4 best unsecured business loans

The best unsecured business loans and lines of credit will take a holistic look at your business finances when you apply. And since there are four common options for unsecured business loans, you’ll have plenty to choose from when looking for the right choice for your business.

1. Business term loan

It’s not hard to find online lenders that offer unsecured business loans. While the Small Business Administration (SBA) works with banks to offer unsecured business loans, the most common and accessible options will be through an online lender like OnDeck.

Term loans have set repayment terms that make it easy for small business owners to predict monthly payments. Interest rates tend to be competitive on term loans, but know that this type of loan may be difficult to qualify for if you don’t have many years in business or a strong annual revenue.

Lendio business loans

Finder rating 4.75 / 5 ★★★★★

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on Lendio's secure site
Lendio is a connection service with a network of over 75 business lenders. Depending on your credit score, you could qualify for a business loan with an APR starting at 6%. And despite a recent warning from the FTC, Lendio still receives positive ratings from its customers that have used it to find a business loan that fits their needs.

2. Business line of credit

Lines of credit are a flexible option to cover working capital, and they frequently don’t require collateral. Because they function like credit cards, small businesses can take advantage of them without having to go through an application process each time you need funding.

And like term loan options, there are online lenders that work with business owners who may not have the best credit history.

BlueVine business lines of credit

Finder rating 4.5 / 5 ★★★★★

BlueVine is a top lender that offers both unsecured lines of credit and invoice factoring to newer businesses. While maximum loan amount is capped at $250,000, there is plenty of flexibility in how much your business can borrow at a time. Same-day funding is also available – for a fee of $15.

3. Invoice financing

Invoice financing — and to a lesser extent, invoice factoring — does require you to use your invoices as a form of collateral. But because they act as a cash advance, not a loan, they are still a type of unsecured financing.

Unlike unsecured loans and lines of credit, invoice financing relies more on your cash flow and annual revenue than your credit score. This makes it a solid choice for business owners who don’t qualify for a more traditional small business loan.

FundThrough Invoice Factoring and Financing

Finder rating 4.5 / 5 ★★★★★

FundThrough offers invoice financing and invoice factoring – the product you qualify for depends on the accounts receivables your business has. It's technically unsecured, too, although your funds will depend on the amount of your invoice.

4. Merchant cash advance

Merchant cash advances are risky — largely because they’re one of the most expensive options out there. They also require businesses to make weekly, rather than monthly, payments.

Businesses use credit card sales to qualify for a cash advance. Like invoice financing, credit score is less important than cash flow. But cash advances that rely on annual revenue typically have higher interest rates. So prepare for a more expensive — if faster — business loan.

Credibly business loans

Finder rating 3.8 / 5 ★★★★★

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Credibly offers a wide range of short-term working capital loans. And while they are expensive – expect to pay between 15 to 30 cents back for every dollar – Credibly is open to more industries than most lenders. However, you'll need to have steady cash flow to be able to handle its daily repayment schedule.

What are unsecured business loans?

An unsecured business loan or line of credit is a type of financing that doesn’t require a business to use an asset as collateral for financing. Depending on the lender you work with and your revenue, you may be eligible for a loan amount between $1,000 to $500,000.

Unsecured business loans don’t require business assets as collateral

Unsecured business loans are best for businesses that need to improve working capital or ease temporary cashflow issues. Since they don’t require collateral, the application process is generally quick — which makes them a smart choice for short-term expenses.

However, unsecured business loans often require a personal guarantee, which means you could lose your personal assets if your business is unable to repay.

Get an unsecured business loan at a bank or online lender

Both banks and online lenders offer unsecured loans to businesses. Your loan options will depend on the lender your business chooses to work with.

Depending on your business needs, you will likely be able to find a business loan from a wide variety of sources. It’s one of the most common types of financing available.

You won’t risk any business assets when you borrow

Since an unsecured business loan or line of credit won’t require collateral, defaulting on your loan or line of credit is much less risky. But since most require a personal guarantee, it’s not completely without risk.

You may not get a competitive rate

Your interest rate could be less competitive if you don’t offer collateral to secure your loan. Secured business loans — like equipment loans — typically offer more competitive interest rates. This is because the bank or lender takes on less risk when a business owner is able to offer security for their capital.

How to pick the right business loan

Ask yourself these six questions before settling on a lender.

  1. Can my business afford it?
  2. How much can I borrow?
  3. How fast will I receive financing? 
  4. What will my payments be?
  5. What are the fees and other charges? 
  6. Is the lender legit? 

This is just a place to start. If you need to cover a short-term expense, loan amount could also be important.

You should also consider a business line of credit or business credit card rather than a business loan for unsecured funding. Depending on your business needs, these could cover a wide variety of expenses without requiring collateral. Plus you won’t need to submit a new application — and wait for approval — each time you need to borrow.

Business financing depends on a variety of factors

Lenders that offer unsecured business loans still need to confirm that your business qualifies. To do so, you’ll need to provide documentation and proof of a few important details, including:

  • Annual revenue
  • Cash flow
  • Time in business
  • Business credit score
  • Personal credit score

A strong credit history is typically required to qualify for the best interest rates on unsecured business loans. But the quality of your revenue, frequency of sales and time in business also matter to lenders.

Overall, lenders require you and your business to meet quite a few qualifications before you receive approval on any business loan.

Recap: Best unsecured business loans

An unsecured business loan could be the right choice if your business has consistent revenue, or if you don’t want to use business assets as collateral. Unsecured loans also tend to have a quicker application process and turnaround than secured loans.

But it might not be a great choice if you’ve experienced a drop in revenue — your business might not qualify for a competitive rate and struggle with payments. And most unsecured business loans come with a personal guarantee. If you have the time, consider taking out a secured loan instead, since collateral makes it easier to qualify for a lower rate.

  1. Best term loan: Lendio
  2. Best line of credit: BlueVine
  3. Best invoice financing: FundThrough
  4. Best merchant cash advance: Credibly

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2 Responses

    Default Gravatar
    RupeshJune 20, 2017

    I need a loans required for business growth and development.my amount is 500000.

      Avatarfinder Customer Care
      AnndyJune 20, 2017Staff

      Hi Rupesh,

      Thanks for your comment.

      Kindly note that the loans we feature on our website are only available to American citizens or permanent residents of the US.

      For your borrowing needs, you may have to get in touch with the local lenders in your country.

      Cheers,
      Anndy

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