What are Unsecured Small Business Loans?

Guide to the Best Unsecured Small Business Loans

For small companies and business owners dealing with a constant lack of funds for growing and expanding their businesses to the next level, excellent funding options include unsecured small business loans. The fact that the application and approval process is generally fast and easy compels most small business owners to look no further than the unsecured small business loan.

Unsecured small business loans have several benefits:

  • No assets or collateral needed
  • Flexible terms with fixed loan payments.
  • Repayment period daily, weekly or monthly.
  • Fixed rates
  • Term loans
  • Easy one-page application
  • Minimum qualifications and additional paperwork
  • Approvals in 24 hours
  • Funding time – 1 to 2 days
  • At least 12 months in business
  • Requires business checking account or business savings account
  • APR ranges from 5.49% to 50 %

How to Get an Unsecured Business Loan

Often entrepreneurs and small business owners are a bit disenchanted by what they sometimes perceive as slightly higher interest rates for unsecured small business loans relative to what they believe they could receive from traditional lenders and financial institutions like a bank or credit union. The stark reality is that banks typically will not lend to most small business owners. This is based either on industry type, annual revenues, years in business, and the personal credit score of the owner. You must remember that if you’re getting a bank loan, while the rates may be lower, they will always require personal security or assets, commonly known as a personal guarantee. Like all things in life, there is a trade-off between the PG (personal guarantee) on a secured business loan vs. an unsecured small business loan. To offset the secured loans and the collateral and personal and business assets posted to satisfy the bank’s requirements, the alternative lender will file a UCC lien on the loan they originate to you.

DEFINITION of ‘Blanket Lien’ aka the (UCC lien)

A lien gives the right to seize, in the event of nonpayment, nearly all types of assets and collateral owned by a debtor in order to satisfy the debt. A blanket lien gives a creditor a legal interest in all of the debtor’s assets.

Can I Get a Traditional Business Loan?

Many online lenders like Sunwise Capital will now offer more bank-like options for businesses like fixed interest rates and terms for those borrowers who want a more traditional looking capital loan and have a credit profile with a personal credit score at least in the mid to upper 600’s that want a 5-year term loan with monthly payments. The era of getting a business line of credit with great credit and with no documented revenue is over. Remember, since the unsecured small business loan requires no assets or collateral, the alternative lender inherently is taking on more risk. As a result, this increases the cost of funds. Often it is best for the business owner to look at this loan in several ways.

One key question you must always ask yourself on any type of business loan is, “What is my R.O.I? (Return on Investment)”? First, based on your industry (see the industries we serve), the number of years in business, your personal and business credit and business history, and a plethora of other factors would your business even qualify for a small business loan? Second, what are you going to do with the money?

And lastly, what happens if you do not get the money? The reality is that upon further examination, these types of unsecured business loans might have lower interest rates than other types of collateralized loans, such as factoring or invoice financing.

Suppose you took the loan to purchase some business equipment (instead of equipment leasing or other equipment financing), inventory, or anything else that may help you grow your business. The small business loan lenders couldn’t care less. The business loan lender’s primary concern is whether or not you can repay the loan, without killing your cash flow.

Unsecured small business loans are comparable in every way to other loans. The big difference is that the unsecured small business loan doesn’t need assets or collateral to secure the loan. When you go to the bank and ask for a traditional bank loan, they will require some security or collateral. That can be stocks, CDs, your home, or an automobile. Basically, anything they can place a lien on. They will also encumber all of the partners or owners of the business.

Typically, your unsecured small business loan will require only one owner and quite often it can be the one with the best personal credit score. The loan application process is very simple. It starts with the business owner filling in a one-page application (Click Here).

Generally, you’ll have to submit the last 3 months of your business bank account as well. Depending on loan amounts, etc. you may have to provide some additional documentation to support your small business loan request. This can include part or all of your business tax return, a current P&L, or a business balance sheet. Do you have excellent personal credit and don’t mind offering a personal guarantee or seeking a personal loan?

If so you can base the decision on your FICO score. This small business loan will typically offer you bank-like interest rates and terms up to five years with monthly payments. The decision is truly up to you. The only question is whether or not you qualify. To see more about a good credit small business loan you can CLICK HERE.

It is safe to say that unsecured small business loans are approved in 24 hours relative to small business loans based on your personal credit and this is one of the factors that you would consider when deciding on the different types of loans that are available to you.

You can have what is considered bad credit. The biggest difference is the time to fund. An unsecured small business loan is considered fast cash and will fund in 24 – 48 hours. Merchant cash advances can fund in 2 to four days.

One advantage of cash advances is you only need six months in business. A small business loan based on personal credit may take 1 to 2 business days. Our SBA loans can fund as quickly as two weeks. SBA loans are good credit business loans.

Traditional business funding can take up to 90 days at a bank if you’re lucky. Borrowers like to have their business loans available promptly. Unsecured small business loans are now the new “new” and are considered as common as bank business loans. These unsecured small business loans are a business finance option that’s offered without the traditional personal guarantees and the business owner can use the funds as they most see fit.

As a result, the business owner is typically put in a much better situation as they are more and more using these unsecured small business loans for business renovation, starting a new division or expansion, reducing outstanding debt, payroll, taxes, and even working capital.

The only caveat is that the lender will expect the business they lend to will maintain that business (and the bank account they are drawing the funds). In addition to those already mentioned, there are numerous other uses for the unsecured small business loans that were previously supported by traditional bank small business loans.

Feel free to call Sunwise Capital or call 888.456.9223 to speak directly to underwriting and to see if you qualify.

Mark J. Kane is a successful entrepreneur and small business owner. He spent 17 years in the investment banking industry. As CEO of Sunwise Capital, he understands the challenges of building a business through equity, debt, and off-balance sheet financing.

Take Your Business Further With A Loan From Sunwise Capital