When you are a business owner in need of a cash influx but are unable or hesitant to put up collateral, an unsecured business loan might be your best option. These loans are a type of financing in which the lender analyzes certain factors about you and your business and decides that they are willing to fund you the money without property as a backup in case you default. In short, the lender deems your financial history to be strong enough to justify taking a risk and loaning you the money. But the greater the risk, the higher your interest rates are likely to be since the company funding your loan does not have any security if you don’t pay.
Most banks and traditional lending outlets consider small business owners as the bottom of the barrel when it comes to being potential borrowers, especially if their credit is sub-par. That’s where AdvancePoint Capital steps in. Unlike traditional bank loans or complicated, drawn-out Small Business Administration loans, our online lenders take an alternative approach to financing. When a bank would tell you no, we have multiple small business financing options available to work with you until there’s a “yes.”
AdvancePoint Capital is an online lender that offers benefits and features for unsecured loans such as:
- Fast approval
- Consideration of your request regardless of your credit
- Flexible repayment options
- A simple application process
- Reasonable, competitive terms
- Speedy access to funds
What Is an Unsecured Business Loan?
Getting a loan is usually straightforward if you have personal and business collateral (personal or business assets) to put up in case you default. But this isn’t always possible for many business owners.
Even if it is possible because the business owner has personal assets, they often don’t feel comfortable mixing their personal property into their businesses. So when their back is up against a wall, they end up closing their doors rather than making personal guarantees.
Luckily, it is not always necessary to choose between these two extreme avenues. It just takes the right financial institution to look at your business from a different perspective and take a chance by offering you an alternative in the form of unsecured loans.
In an unsecured loan, no collateral requirements are necessary. Instead, the lenders often up the criteria required to qualify for the financing requested, requiring a minimum credit score and annual revenue.
These loan terms are usually precisely what the small business needs when they don’t want to use collateral as a backup. Even with the higher interest rates involved to compensate lenders for the increased risk of unsecured business loans, this financing option is still a good option to help you reach your goals, get through hard times, and move toward success.
At AdvancePoint Capital, we can help you get the best types of unsecured loan terms to give you the working capital required for your business.
How Do I Get an Unsecured Business Loan?
Getting the appropriate funding option for your business is not only a big step, but it’s also a significant growth turning point that can push a company forward. With that being said, you need to make sure that your efforts to obtain your business loan aren’t wasted. Understanding unsecured loans require some initial inquiries and steps in order to increase your chances of successful funding.
- Understand the ins and outs of the application process
- Take a deep dive into the different lenders and determine the best unsecured loan for your business.
- Secure all pre-qualification information and make sure you’re meeting the stated requirements
- Get all of your application documentation and material in order and ready.
After you’ve filled out an application, there are specific qualifications that a lender may look at to determine if you’re qualified. Lenders will look at your time in business, annual revenue, and personal credit score along with your business credit profile. While a high credit score will undoubtedly help your chances, unsecured business loans can be obtained with less than optimal credit from the right lender. That’s where AdvancePoint Capital can help. We offer loans for businesses like yours to help fund your endeavors, meaning you won’t need to put up collateral to obtain capital.
Can I Get a Business Loan Without a Personal Guarantee?
A personal guarantee is a legal promise that an individual makes to provide payment for any and all credit issued to their business from a financial institution. It states that if their business cannot complete payment and repay their debts, the individual is held personally responsible for fulfilling the lender’s requirements. Business loans all come with their own set of risks. Unsecured business loans are no different; in fact, their risks are even higher because there is no personal collateral at hand. Therefore, a business guarantee is more popular with business loans of this nature.
Most banks and lenders need to make sure that you’re able to make payments and pay back the funding they provide, so most will require collateral (such as real estate) or some form of personal guarantee. However, some exceptions, like high revenues and established business credit scores, will grant certain unsecured loans and not require collateral to business owners.
A strong and robust enough business can help mitigate the risk a lender may be taking on by providing strong sales performances as a rationale for unsecured lending loans. You can obtain unsecured business loans with no personal guarantee or real estate collateral, however, it may not be as big as a secured business loan.
What Is the Interest Rate on an Unsecured Business Loan?
The interest rates on unsecured business loans can range depending on the lender, time in business, annual revenue, and loan amounts. Unfortunately, there’s not a one size fits all approach for determining the interest rate on unsecured loans. Because collateral is such a popular method of securing a business loan, interest rates will be higher without it. Collateral refers to a specific asset or a set of assets that provide security to the lender in the case of unpaid payments. Financial institutions will require assets equal to or greater than the loan’s value with traditional loan options. Because unsecured loan options don’t require these assets — you will see increases in interest rates.
Depending on the factors we mentioned before such as time in business and annual revenue — you can expect these interest rates to vary fairly greatly with varying term limits and payment options. Before filling out an application, it’s a smart move to have an idea of what type of payment plan you’ll be on and how much interest you’re willing to pay. Because interest rates can be reliant on so many business factors, the best way to determine which type of unsecured business loans fit your business and how much your interest rate will be is to contact us and receive a quick quote!
All Credit Is Considered
For many lenders, unsecured business loans have a level of risk only mitigated by accepting borrowers with pristine credit. Small business owners often have credit issues because of the ups and downs that come with running a business.
Because the lenders at AdvancePoint Capital understand the big picture, we look at more than just your credit score. This helps us to be able to approve more small businesses for loans – the same small businesses that banks and SBA loans would turn down.
No matter where your personal score falls in this breakdown, our knowledgeable agents are available 24 hours a day to work with you and find a solution for your needs. All you need to do is reach out, complete the simple, one-page online loan application, and let our agents work with you to see which financing products we have that will help you. Flexible terms, simple solutions — that’s AdvancePoint Capital.
The Best Types of Unsecured Business Loans for a Small Business Owner
There are alternatives to traditional secured business loans from banks and the small business administration. Let’s look at the four most popular unsecured loans and their loan terms available in the marketplace.
1. Short Term Unsecured Business Loan
Short term unsecured small business loans (term loans) are an excellent option for small business owners when traditional small business loans fall through. Not all short term business loans are unsecured, so make sure you check the offers and agreements for terms for this type of loan. These small business loans provide a fixed amount of money upfront (lump sum) loan amount, with a fixed payback amount calculated using a factor rate, over a short fixed-term of typically 6 to 18 months. Short term small business loan rates are not principal & interest but are based on a “factor cost” and cost more than traditional loans.
This product is a fixed loan amount, not a line of credit, so you can’t draw funds as you go. This term loan is incredibly popular, given that a short term loan requires very little paperwork and has much more forgiving credit requirements than traditional term loans. This product is best for working capital and cash flow needs.
Short Term Unsecured Business Loans Product Overview
Loan Amount Limit: Loan amount up to $500,000
Rates: Factor rates starting at 1.09% up to 1.45% of the loan amount
Terms: 6 to 18-month term loans (typically 12 months or less)
Fees: Origination fees 0% to 5%
Loan Payments: Weekly, bi-weekly, and in some cases daily Monday-Friday
Credit Standards: Poor to excellent credit score accepted. All credit considered
Documentation: Reduced documentation. One page application and 3 months bank statements required
Time Frame: Same day to 24 hours
2. Business Line of Credit
A Business line of credit is an open revolving line of credit, just like credit cards. This type of funding allows businesses to draw funds when needed on-demand or make purchases. Business credit lines charge principal & interest. A business line of credit has a limit that cannot be exceeded without a lender’s approval and is not open-ended forever. It requires renewal by lenders either semi-annually or annually to be extended. The primary reason businesses choose a credit line instead of a term loan is the draw feature, affordable rates, and flexible terms. A business line of credit may or may not be an unsecured business financing option so check the offer and agreement for details. This product is the best option for cash flow shortages.
Business Line of Credit Product Overview
Interest Rate: Starting at 5.50% or treasury index plus 1% to 2.5%
Repayment Terms: Open revolving line of credit
Fees: Origination fees ranging from 0% to 3%
Loan Payments: Monthly, bi-weekly, or weekly
Borrower Credit History: Fair to excellent credit score required
Documentation: Reduced documentation. One page loan application and 3 months bank statements required
3. Business Cash Advances (BCA)
Business cash advances are also known as the purchase of future sales agreement that advances future sales at a discount. The business is responsible for paying back a fixed payback known as a specified amount, which is higher than the lump sum amount advanced to the company. This difference between the advance amount and the payback amount is called the “factor rate or cost,” which is a fixed cost. These are not principal & interest costs.
The advance is repaid by taking a fixed percentage of future overall deposits called the specified percentage. The payments are collected by an ACH fixed daily or weekly payment deducted from a bank account based on the specified percentage of future sales. At the end of every month, reconciliation can occur. If the fixed payments taken out of the account monthly are more than the set future percentage of monthly sales, the business can request a refund for overpayment so that the set specified percentage of sales collected matches the revenue volumes. Repayment continues until the payback amount is paid back in full.
There is no time limit with advances as the fixed payback percentage ever changes due to fluctuating revenue. Business cash advances are not loans but advances of future sales of the business. No personal guarantee or personal assets will be required. BCAs are the best product for when cash flow shortages are a priority.
Factor Rates: Ranges from 1.09% up to 1.45%
Repayment Terms: This is not a loan, so there are no time limits. Payments continue until paid in full based on specified percentage collection method and are dependent on future revenues
Fees: Origination fees that range 0% to 5%
Payment: Weekly or daily Monday-Friday fixed ACH
Credit History: All types of credit considered from bad to excellent
4. Merchant Cash Advance (MCA)
A merchant cash advance is also known as a purchase of future sales agreement that operates very similarly to BCAs, but the most significant difference is the repayment process, which is connected to the future credit card sales instead of overall sales. Merchant cash advances take a set percentage of future credit card sales at the time of batch until the advance is paid back in full. Businesses find this valuable when they have fluctuating revenues and don’t want to be locked into a fixed payment that could negatively impact cashflow or margins of profit if revenues decline or fluctuate.
This product is best for working capital needs. Remember, a merchant cash advance is not a loan, but an advance, by selling a portion of the business’s future sales at a discount to a funder in exchange for money. No personal guarantee will be required.
Rate: Range from 1.09% up to 1.45%
Repayment Terms: No time limits
Fees: Origination fees range from 0% to 3%
Payment Terms: Set fixed percentage of future card revenues
Borrower Credit History: All types of credit considered from Bad to excellent
Paperwork: 1-page application, business bank statements, merchant credit card sales processing statements
5. Business Credit Cards
Business Credit cards work similarly to personal credit cards. They are a revolving line of credit with a credit limit with a minimum monthly payment requirement typically lower than that of a business loan. You only pay interest based on the current principal. Great for cash flow needs. Careful that you check information and disclosures for a personal guarantee, as some cards due have collateral required as well.
Credit Limits: $500 up to $125,000
Interest Rates: intro interest rate at 0% up to 29%
Repayment Terms: Revolving line of credit
Payment Schedule: Monthly
Collateral: No collateral required
Personal Guarantee: Yes/No
Application Process: Online application, sometimes income proof
Underwriting Process: Instant funding, 2 to 3 hours funding
The fast, convenient, and straightforward way to get the money you need for your business – now!
Get your quote today by filling out our simple form.
Frequently Asked Questions
What is the interest rate on an unsecured business loan?
The interest rate and costs will depend on the product you are offered. Business Cash Advance has factor rates that range from 1.09% to 1.45%. Unsecured business loans may have either simple interest or a factor cost depending on the product. Interest Rates start at 9%
Which banks offer unsecured business loans?
Most banks do not provide business loans without some form of security. Alternative business online lenders and funders are the main entities that offer unsecured business loans.
Fast and Easy Small Business Financing
Unsecured business loans at AdvancePoint Capital typically range from $10,000 to $500,000. They are based on a combination of factors, including your business’s annual revenue, monthly gross sales, any business assets you may have, your personal credit score, and your business’s credit score. This multitude of variables ensures that if you lack in one or two of these areas, the others can help boost your chances of approval.
Unlike traditional bank loans that take weeks or months to be approved for, our agents will typically have an answer for you within just a few business hours. Once you have qualified for your loan and the paperwork has been completed, you can have access to your funds in as little as one business day!
If an unsecured business loan just isn’t in the cards for you, we don’t give up there. Our lenders offer alternative financing solutions in the form of merchant cash advances, business lines of credit, invoice factoring, and more. We want you to be successful!
Start With This Online Form
Get an unsecured business funding quote! When you are ready to see if you qualify, it’s a simple, quick process. There are no upfront fees involved. Just fill out this one-page online form, and our agents will contact you, or you can contact them to find a business financing solution on terms that work for you.
AdvancePoint Capital offers small business loan options such as unsecured business loans to qualified businesses. All credit is considered. Enjoy flexible loan options for your financing needs. From the comfort of your own home or office, we are an online lender with simple online application forms to push your business forward.