Unsecured Business Loans: Maybe you’re a new entrepreneur looking to get that brilliant idea of yours off the ground. Or perhaps your business has been around for a while but now you need an influx of cash to cover some unexpected costs or expand operations.
Either way, a small business loan could be just what you need to take things to the next level. But trying to wade through all the options out there and figure out the best loan for your specific situation? Yeah, no thanks. That’s why we put together this list of the top 6 unsecured small business loans on the market right now—to make your life easier. We’ll give you the nitty gritty on loan amounts, terms, qualifications, and more so you can zero in on the perfect lending solution for your company.
What Are Unsecured Business Loans?
An unsecured business loan is one that is not backed by any collateral, like business equipment or assets. Instead, the lender is trusting your business based on your credit and financials alone. These loans tend to be riskier for lenders, so they often come with higher interest rates. However, they are more flexible and easier to qualify for than secured loans.
Unsecured business loans are a good option if:
- You have a solid business plan and financial history, but lack physical business assets to use as collateral.
- You need funding quickly for short-term needs like covering payroll or accounts payable. The approval process is typically faster than for secured loans. -You want to avoid tying up business assets as collateral. If you default on the loan, the lender cannot seize your property.
Some of the most common types of unsecured business loans include:
- Business credit cards: Easy to qualify for but often have high APRs. Good for small, short-term needs.
- Line of credit: Gives you access to a revolving amount of money to draw from as needed. Interest is only charged on the amount you use.
- Short-term loans: Typically for less than a year. Easy to obtain but interest rates are usually very high.
- Merchant cash advances: Funding provided in exchange for a percentage of your business’s future credit card sales. Very expensive but quick funding.
When shopping for an unsecured business loan, compare offers from multiple alternative and traditional lenders. Look at factors like the APR, loan term, fees, and loan amount to find financing that suits your needs at the lowest cost. Be ready to provide documentation like tax returns, profit and loss statements, business licenses, and bank statements to verify your business’s financial health.
With the right lender and terms, an unsecured business loan can provide working capital to help your business grow and thrive. Evaluate your options carefully and only borrow what you can afford to pay back.
Benefits of Unsecured Business Loans
Unsecured business loans offer many advantages over secured loans. Since they are not tied to any collateral like equipment or real estate, they provide more flexibility and less risk.
1. Quick access to funds
With an unsecured loan, the application and approval process is usually faster. There’s no need to go through the process of providing and verifying collateral. This means you can get access to capital more quickly to take advantage of new opportunities or solve urgent issues.
2. Less risk to your assets
If you default on an unsecured loan, the lender cannot seize your business assets. Your equipment, property, and other collateral remain safe. This gives you more security and stability. While the interest rates on unsecured loans are often higher due to the lack of collateral, the peace of mind may be worth it.
3. Flexibility in how you use the funds
Unsecured business loans provide flexibility in how you utilize the capital. You can use the money for any business purpose, whether it’s hiring new employees, marketing your products or services, covering operating expenses, or other short-term needs. There are no restrictions on how the funds can be applied like with equipment financing or real estate loans.
4. Chance to build business credit
By taking out an unsecured business loan and paying it back on schedule, you have the opportunity to establish or improve your business credit rating. This can make it easier to qualify for other forms of financing in the future at more competitive rates. Lenders will see you as a lower risk, allowing you to borrow on more advantageous terms.
Unsecured business loans do come with higher interest rates, but for many companies, the benefits outweigh the costs. If you need fast, flexible funding and want to avoid putting your business assets at risk, an unsecured loan could be a great option. Discuss your needs and options with a few lenders to find the best offer for your unique situation.
Top 6 Providers for Unsecured Business Loans
When you need funding for your small business but don’t have collateral to put up for a secured loan, an unsecured business loan can be a good option. Unsecured loans are offered by many lenders, but these six providers are some of the best:
OnDeck offers unsecured business loans and lines of credit up to $500,000. They focus on small businesses and can fund your loan quickly, often within a day. OnDeck evaluates your business based on performance, not just your personal credit score. They do charge higher interest rates to offset the risk of no collateral.
Kabbage provides unsecured business lines of credit up to $250,000. They use an automated online application and can fund your account in minutes. Kabbage considers your business revenue and transactions, not just your credit, to qualify you for a line of credit. Their lines of credit can be expensive, with high APRs, fees for accessing your funds and monthly service charges.
BlueVine offers unsecured business lines of credit up to $250,000 as well as invoice factoring. They have a fast, easy online application process and funding usually within 24 hours. BlueVine considers your outstanding invoices and business financials as well as your personal credit to qualify you. Their products can be pricey, with factoring fees up to 4% per invoice and lines of credit at 15-78% APR.
Fundbox provides unsecured business lines of credit up to $100,000. They have a simple online application and funding within 24 hours. Fundbox looks at your business transactions, revenue, and growth potential, not just your credit score. However, their lines of credit can be expensive, with 12-60% APR and weekly repayment.
5. Credibility Capital
Credibility Capital offers unsecured business loans and lines of credit up to $350,000. They focus on small businesses and have a fast application process with funding in as little as 2 days. Credibility Capital considers your business cash flow, revenue, and growth projections to qualify you, in addition to your personal credit. Their interest rates are 8-36% APR.
LendingClub provides unsecured business loans up to $300,000 for most small businesses. They have an easy online application and loans are usually funded within 7 days. LendingClub evaluates your business financials and revenue, not just your personal credit score. However, their loans come with higher interest rates of 10-35% APR to account for the lack of collateral.
In summary, if you need fast, unsecured funding for your small business, these top providers offer competitive options. Be prepared for higher interest rates and do your research to find the best deal for your needs.