Get a Business Loan without Collateral
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 small business 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 and the need for weekly payments instead of monthly payments, since the company funding your unsecured small business loans does not have any security like a secured loan, other than business collateral, if you don’t pay.
What is an Unsecured Business Loan?
An unsecured business loan is a business funding that does not require collateral to secure the financing. The loan is supported by the credit worthiness of the borrower along with other factors that support a business loan without requiring collateral. There are many types of business funding that may not require collateral such as business term loans, business line of credit, merchant cash advances, and invoice factoring.
Most banks, credit unions, and traditional lending outlets consider small business owners at 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 that require everything including a business plan and the kitchen sink, we take an alternative approach to financing businesses without collateral. When a bank would tell you no for a loan or line of credit because of collateral required, we have multiple small business financing options available to work with you until there’s a “yes.” Let us be a part of your future success.
AdvancePoint Capital is an online lender that offers benefits and features for unsecured loans such as:
Flexible repayment options
A simple application process
Reasonable, competitive terms
Speedy access to funds
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AdvancePoint Capital makes the loan application process a simple, straightforward experience.
6 Best Unsecured Business Loans (October 2023)
There are alternatives to traditional secured business loans or a secured line from banks and the small business administration. You don't need to provide collateral and any personal guarantee. What are unsecured loans, you ask? Let’s look at the 6 most popular unsecured loans and their loan terms available in the marketplace.
Short-Term Unsecured Business Loans
A short-term business loan is a quick option when looking for the best-unsecured business loans. A short-term loan has lenient credit requirements and reduced documentation. These unsecured term loans have repayment terms of 6 to 18 months to repay.
Business Line of Credit
Business lines are a great option for businesses looking to draw money as needed like a credit card. You are only required to pay interest on the outstanding balance with a business line. An unsecured business line is available without having to pledge collateral like real estate.
Business Cash Advances
A business cash advance allows for bad credit and approvals are based on monthly revenue. A lump sum of money is offered like a small business term loan, but repayment is a set percentage of future sales of the business. This unsecured funding has daily or weekly payments.
Merchant Cash Advance
Merchant cash advances are provided by alternative lenders. Merchant cash advances offer money upfront in a lump sum advance with flexible payment options as repayment is a set percentage of future credit card processing. Merchant cash advances are not considered term loans.
Invoice financing, also known as invoice factoring, is for businesses that invoice clients regularly. The invoice financing company will advance an unpaid invoice before terms are due, accelerating cash flow for the small business owner.
How do Unsecured Business Loans Work?
Getting business financing does not have to include putting up collateral.
In an unsecured small business 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, personal guarantee, and annual revenue for the best-unsecured business loans. Unsecured business loans typically have shorter repayment periods than secured loans. Worried about a low credit score? you can get an unsecured business loan with bad credit with no personal guarantee.
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, and weekly payments instead of monthly payments, 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 including some financial statements.
- Work through your credit history. personal credit score and business credit score
What lender can help you get an unsecured Business Loan?
- Banks & Credit Unions- Your bank or credit union that you work with for your business banking may have unsecured business loans with attractive rates and terms.
- Online Business Lenders- There are numerous online business lenders who offer a variety unsecured business financing products with unique features and terms.
- Business Loan Brokers- Business loan brokers have a lender network of a various unsecured business funding products. They can help you shop lenders to find the best products and terms while meeting your requirement of an unsecured business funding option.
When you fill-out an application, there are specific qualifications that a lender may look at to determine if you’re qualified. Alternative lenders will look at your time in business, annual revenue, and personal credit score along with your business credit score. While a high personal 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 or a line of credit for businesses like yours to help fund your endeavors, meaning you won’t need to put up collateral to obtain capital.
Pros and Cons of Unsecured Business Loans
The below are some benefits and drawbacks of unsecured business loans
- No collateral is required- Unsecured loans do not require collateral to secure for financing.
- No risk of having collateral seized- Since there is no collateral pledged, you don't have to worry about your collateral being seized by the lender if you go into default.
- Streamlined application process- Without the need for collateral, lenders offer a fast application process with terms in as little as 1 day.
- Cost of capital- Unsecured business loans have higher interest rates and fees to cover the risk of an unsecured business funding vs. a secured business funding.
- Smaller borrowing amounts- Many lenders will cap the amount of funding a business can receive with security of collateral.
- Repayment terms- Without security of collateral, lenders will shorten the terms of unsecured business loans to reduce the risk.
Can I Get an Unsecured 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 guarantee of personal collateral or valuable assets 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 a minimum credit score, collateral (such as real estate), or some form of personal guarantee from the small business owner for term loans. However, some exceptions, like high revenues and established business credit scores, will grant certain unsecured loans and not require collateral from 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, they may not be as big as a secured business loan.
What is the Interest Rate on an Unsecured Business Loan or Line of Credit?
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, business credit, 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 Fast Unsecured Business Loans
For many lenders, unsecured business loans have a level of risk only mitigated by accepting borrowers with pristine credit. Small business owners often have business credit or personal 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 for a term loan.
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 business financing 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 unsecured financing products we have that will help you. Flexible terms, competitive interest rates, and simple solutions to secure funding— that’s AdvancePoint Capital.
Alternatives to Unsecured Business Loans
What can you do if you are denied an unsecured business loan?
- Personal Loans- Personal loans are available online that can be used for business needs.
- Credit Cards- Many business owners use credit cards to help support the business. Its a common practice.
- Ownership Funding- Sometimes ownership will lend the business money at lower rates and better terms that what can be offered on the open market of business lending.