How to Get a Business Loan Without Collateral in 2019

Table of Contents
Can You Get a Business Loan with No Collateral?
Unsecured Business Loans
Blanket UCC Lien
How to Obtain an Uncollateralized Loan
After You’ve Obtained a Loan
Implementing These Tips

As a business owner, there may be times when you need quick cash to put toward expanding your inventory, payroll, or production costs. 

The problem is, finding that cash is not always easy. Many lenders only offer secured loans that require substantial collateral.

For example, a mortgage is a secured loan because the lender can take over ownership of the home if payments aren’t made. Likewise, a car loan is a secured loan because the lender can take the car back in lieu of payments.

When you don’t have collateral to guarantee your loan, you may be wondering if you can obtain an uncollateralized loan. Luckily, some lenders do offer unsecured business loans. These loans can have strict guidelines since there is no traditional personal guarantee on the loan, but they can be a good option for those who need a business loan.

If you’re wondering how to get a business loan without collateral, keep reading. We’ll guide you through the process so you know exactly how to find the right loan for your business.

Can You Get a Business Loan with No Collateral?

Yes, it is possible to get a business loan without collateral. 

There are many types of unsecured business loans available, including SBA loans, term loans, merchant cash advances, and more. Here’s what you need to know about each type.

SBA Loans

One of the most affordable unsecured loans for businesses is a business loan from the Small Business Administration. This government agency offers loans through SBA-approved lenders and institutions. 

SBA loans allow you to borrow money for just about any business need, including purchasing inventory and buying real estate. These types of loans have long payment terms and reasonable interest rates. However, most SBA loans require a strong borrowing history and a high credit score.

Online Term Loans

Online term loans can be obtained in both long-term or short-term formats. 

The creditor will determine your repayment plan for long-term and short-term loans based on a variety of factors such as credit risk and time in business. In general, short-term loans are usually easier to qualify for, but can be more expensive than long-term loans.

Merchant Cash Advance

A merchant cash advance is not a loan in the same sense as the other options mentioned above. Instead, it is a transaction where a business gets cash in exchange for a percentage of daily credit card or debit card sales. 

Merchant cash advances are a fast option that do not require collateral or a great credit score. The repayment plan on a merchant cash advance is a bit different than that of a traditional loan. Typically, a lender will advance a company cash in exchange for a percentage of the company’s daily credit card sales. For that reason, businesses that make a large portion of revenue through credit card payments may consider this option as a way to get quick cash.

Private Lenders

Some private lenders are willing to offer a loan without collateral, but most require a personal guarantee. The personal guarantee could come in the form of a cosigner or other assets. 

Unsecured Business Loans

Unsecured loans do not require any traditional collateral.  Thus, businesses without valuable assets needed to obtain a traditional secured loan may qualify for an unsecured business loan. 

These loans are a bigger risk for the lender, so interest rates are usually higher to compensate. An unsecured business loan will likely come with a shorter repayment schedule and higher APR than a secured business loan.

  • No Equity Required: Unsecured loans do not require any equity. This means the company may take a loan without any money down and without having assets that outweigh the liabilities of the loan.
  • No Down Payment: Down payments can be a very limiting factor that prevents businesses from growing. Unsecured business loans are often free of down payment requirements, meaning there is not a large upfront cost for you to obtain the cash you need.

  • Personal Guarantee: One way to get an unsecured business loan is by making a personal guarantee. This means that you, as an individual (not as a business), promise to pay the debt of your loan if your company is not able to complete payments in full. 
  • Blanket UCC Lien

    Some lenders offer a blanket UCC lien instead of standard collateral. This term means that if a business owner stops making payments on their loan, the lender can pursue the company assets to pay off the rest of the loan. A loan with a blanket UCC lien may be the best option for certain businesses if they are confident they will be able to pay off the loan.

    It’s important to understand all aspects of unsecured business loans. Be sure to read through the contract thoroughly and know what you’re signing up for.

    How to Obtain an Uncollateralized Loan

    Are you ready to obtain an uncollateralized loan for your business? Follow these steps to get the cash you need:

    1. Evaluate Your Business

    Before you start your research for an unsecured business loan, you’ll want to evaluate your business. Think about where your business stands financially, and why you’re in need of money. When will you have funds to pay the money back, and how much can you risk? Determine your financial strengths so it is easier to identify the right loan when you see it. Here are some questions to help you honestly evaluate your business.

    • What is your credit score?
    • How much money do you need to borrow?
    • How soon can you pay back the loan?
    • Do you have money for a down payment?
    • Will the cost of fees and interest rates equal less than the profits to be made by borrowing the money?
    • Do you have any valuable collateral that could be used for a self-secured loan?

    2. Improve Your Finances

    It’s true that you can get a business loan without any collateral or a good credit score. But the better your financial situation, the lower the risk the lender takes in allowing you to borrow money. 

    This means interest rates will likely be lower and terms will be more flexible. Do everything you can to improve your company finances before you start researching loans. Here are a few ideas on ways to do it:

    • Boost credit score by making payments on time
    • Pay off outstanding bills
    • Lower debt or combined other debts
    • Avoid applying for new credit cards until you’ve chosen the right loan
    • Keep unused credit card accounts open
    • Dispute inaccuracies on your credit report

    3. Create a Business Plan

    Most companies create an in-depth business plan before they launch, but it’s never too late to create one or add to an existing business plan.

    This is a chance to define your business purpose, identify where profits come from, hone a growth strategy, and project cash flow. All of these details will be very important in choosing the right business loan, so it’s a good idea to go over your business plan even if you already have a solid one in place. Some lenders may even require a business plan in the loan application. Here are some other things to include in your business plan:

    • Marketing plan
    • Uses for funds
    • Distribution and logistics
    • Cost of running the business
    • Potential investments
    • Financial history

    4. Apply for a Loan

    After thorough research, you’ve hopefully found a loan that’s a great fit for your business. 

    Now it’s time to apply for the loan and wait to find out if you qualify. Most alternative lenders will do an initial soft credit pull. However, alternative lenders tend to consider other factors such as business revenue and length of time in business.

    Here are some of the documents and information you will probably need for your loan application:

    • Proof of ID
    • Address verification

    After You’ve Obtained a Loan

    Once you’ve obtained your uncollateralized loan, be sure to keep up with payments. This will minimize the fees and interest that accumulates over the duration of the loan terms. Some lenders will set up automatic payments from your checking account. If this is the case, always keep plenty of funds in your account to avoid overdraft fees.

    Implementing These Tips

    After reading this guide to uncollateralized loans, you’ll be well equipped to find the right loan for your business. A business loan will help you grow your business and avoid the stresses that come from operating on a tight budget. Put the money to good use, and your business will flourish.

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