Unsecured business loans can help you access funds to grow your business without having to put up any collateral. If you need extra cash flow or capital to expand your business venture, we’ve evaluated the best business loans based on loan terms, fees, rates, customer satisfaction, and overall quality.
If you require cash due to a cash flow shortfall or have a less than perfect credit score, American Express Business Blueprint™ could be a promising option.
Fundera does not lend money directly but offers a digital marketplace where you can connect with lenders to provide a financing solution for your business.
National Funding offers small businesses working capital and equipment financing loans that are suitable for a broad range of businesses, and you could receive approval and funding within 24 hours.
An unsecured business loan is a form of financing not secured by collateral. The borrower makes payments to the lender regularly but has no assets that can be seized if they fail to make their payments.
Unsecured business loans can be used for anything related to your business, from buying inventory or equipment, funding your operational costs, or paying off debtors.
To qualify for an unsecured business loan, however, you’ll generally need a good credit score and stable income. Suppose your business is new or young with little financial history. In that case, it’s will be difficult to qualify for an unsecured loan — but your chances may improve over time as your business grows and becomes more established.
What are the requirements to get an unsecured business loan?
When applying for unsecured business loans, you must meet the requirements. The following are some of them:
Loan application form: The first thing you need to do is fill out a loan application form. You can use the company’s website or contact them directly to get a copy of the application form. The form contains all the necessary details that the lender will need to process your request for a business loan.
Personal guarantee or UCC Lien: Expect to be asked to guarantee the debt with your assets. If you’re a sole proprietor and don’t have assets to protect, this is often the only way lenders can protect themselves. They will ask you to sign a personal guarantee with them, which means they can come after you if you fail to pay back the loan.
Personal and business credit scores: You will be asked to provide your personal and business credit scores when applying for an unsecured business loan. Lenders and banks use these as indicators of how likely you are to repay their money on time. In addition, it also helps them determine how much risk they are taking when deciding whether or not to lend money to you.
Income statement: If you have a limited business history, you may be asked to provide your income statement or other books of account. These documents will show your business’s financial standing and help the lender assess your ability to repay the loan.
Proof of continuity of business: The lender may require proof that your business has existed for at least two years before applying for the loan. This can include annual returns or accounts filed, invoices from suppliers or customers, and any other documents that show the continuity of your business throughout the year.
Office address: The lender will also want to see an address where they can contact you easily in case they need any further information about your application.
What are the benefits of unsecured business loans?
There are many benefits of unsecured business loans, including:
Shorter loan application process: Applying for a business loan can be quite tedious and time-consuming. However, the entire process is significantly faster and easier than any other financing option when it comes to unsecured business loans. You can get approved within a day if your credit history is good enough.
No collateral requirement: Unlike other types of loans that require collateral, unsecured business loans do not require any form of collateral to guarantee payment. This makes it easier for individuals with no assets or property to get loans from banks and other financial institutions.
Build credit history: Unsecured business loans help you build up your credit history by showing lenders that you are reliable and trustworthy with money, which makes it easier for you to get approved for future loans in the future.
No collateral: You do not have to offer collateral when applying for unsecured business loans. Banks and other financial institutions will still check your credit score.
Tax benefits: All interest paid out can be deducted from your taxable income at the end of the year.
Loan amount based on business background: These loans do not require any collateral, so the loan amount is decided based on the borrower’s income, business viability, and credit history.
How to choose the best unsecured business loans
Many small-business owners want to ensure they get the best deal on their business loans. That’s why knowing how to choose the best-unsecured business loan for your needs is essential. Here are some tips on how you can do just that:
Understand your needs: The first step in choosing an unsecured business loan is to know your needs. Do you want to buy equipment or pay off debt? Do you have enough cash flow to cover payments? How much do you need?
Interest rate: While this may seem like an obvious tip for any type of loan, most people fail to consider whether or not the interest rate is competitive with other lenders’ offerings. If the interest rate is too high for your budget, you might want to look elsewhere for financing instead of taking out another loan from the same bank or credit union.
Repayment terms: The longer the term, the lower your monthly payments, and the more interest you’ll pay over time. You’ll need to consider if longer terms are ideal because it’ll help keep your payments manageable while giving you more flexibility when managing cash flow throughout the year. However, you’ll pay more interest.
Application fees: Some banks charge application fees for all loans, while others charge only for unsecured ones. When comparing lenders, look at what each bank charges in application fees and other fees associated with borrowing money.
¹All businesses are unique and are subject to approval and review
