Taking out an unsecured business loan gives business owners financing without securing the loan with collateral. These loans can be especially appealing to business owners who don’t have assets.
Since these loans don’t require collateral, the eligibility requirements for some types are often more strict than other business loans, and interest rates can be higher, especially if you have bad credit.
If you’re interested in an unsecured loan, there are a few different places where you can find an unsecured business loan or business line of credit. Both traditional lenders and online lenders offer unsecured loans, but each lender type has different pros and cons.
Traditional lenders (banks and credit unions)
The first place where you might look to get an unsecured business loan is a traditional lender, which includes both banks and credit unions. A bank is a for-profit institution often providing personal and business banking options. A credit union offers similar services, but it is a not-for-profit institution that works primarily to serve its members.
With both types of lenders, you typically have access to in-person services at a local branch. They also often have online and mobile services available. Traditional lenders have been around the longest and tend to offer a more trustworthy track record.According to the Federal Reserve’s 2023 Small Business Credit Survey, 79 percent of small-bank applicants and 61 percent of large-bank applicants were satisfied with their experiences compared to 40 percent of applicants at online lenders.
But traditional lenders don’t excel at everything. Most banks work with established businesses with at least two years in business and personal credit scores in the good-to-excellent range.
You may find that the online services of banks and credit unions aren’t as convenient or simple as online lenders. Some traditional lenders have online application options for business loans, but others do not. You often have to wait multiple days or weeks to hear back once you submit a loan application.
3 banks that offer unsecured business loans
Not all banks offer business lending options, and even if they do, they may not have an unsecured business loan option. Here are a few banks that do offer unsecured business loans:
| Lender | Unsecured loan types | Top features |
|---|---|---|
| Bank of America | Unsecured term loanUnsecured business line of credit | Low interest ratesFree business credit report |
| Chase | Unsecured term loan | Loan amounts start at $5,000 7-year terms |
| U.S. Bank | Unsecured small business loan Unsecured small business line of credit |
Low interest rates Variety of line of credit options Available to startups with 6 months in business |
Online lenders
Online or fintech or alternative lenders provide streamlined business loan applications that can be funded entirely online. This option can be more convenient and quicker than getting an unsecured business loan from a traditional lender.
These lenders are more accessible to various borrowers, including startups and business owners with bad credit. But the convenience of online lenders often comes with a higher price tag, meaning they often have higher interest rates and loan fees than traditional lenders.
3 online lenders that offer unsecured business loans
Here is a look at some online lenders that offer unsecured business loans.
| Lender | Unsecured loan types | Top features |
|---|---|---|
| Fora Financial | Unsecured term loans | Loan amounts from $5,000 to $1.5 millionAccepts bad credit Funds within one business day |
| Triton Capital | Working capital loan | Low starting interest ratesAccepts fair credit |
| Credibly | Unsecured business line of credit | Offers loans directly and through partnersSame-day funding availableLong-term loans up to 10 years |
Bottom line
The best unsecured business loan offers affordable financing without securing the loan with collateral. As you look, consider where is the best place for you to get an unsecured business loan. Think about each lender’s interest rates, fees and other costs of the loan to understand the full picture of the loan costs.
Frequently asked questions
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How do unsecured business loans work?
Unsecured business loans work mostly like other business loans: Businesses apply for the loan and receive either a lump sum or a line of credit that must be repaid with interest and other fees. But unsecured business loans are different from secured business loans because they don’t require any collateral to secure the loan. -
Is it hard to get an unsecured business loan?
Getting an unsecured business loan can be difficult, but it depends on the lender and the financial strength of the business applying for the loan. Lenders consider the age of the business, its revenue and the business credit score, among other factors, to determine if they will grant the loan. For businesses with favorable characteristics, it will likely be easy to get a loan. Other businesses may need to work more to prove to the lender that they can handle the loan. -
What is the difference between unsecured and secured business loans?
The main difference between unsecured and secured business loans is that unsecured loans don’t require collateral, while secured loans do. Collateral can be anything from business equipment to commercial real estate that the lender can seize if the borrower defaults on the loan. While unsecured loans do not require collateral, they often require a personal guarantee.
Introduction
When starting or expanding a business, securing the necessary financing can be a daunting task. While many business owners turn to traditional loans, these often require collateral and strict eligibility requirements. Unsecured business loans, on the other hand, offer a potential solution for those without assets to use as collateral. But before jumping into an unsecured loan, it’s important to understand the pros and cons of this type of financing and explore different lender options. In this guide, we’ll take a closer look at unsecured business loans, including their advantages and disadvantages, and the different types of lenders that offer them. Whether you’re a small business owner looking to expand or a startup entrepreneur in need of funding, understanding unsecured business loans can help you make an informed decision about your financing options.
Bottom line
In conclusion, while unsecured business loans can be a great option for those without assets, it is important to carefully consider the pros and cons of each type of lender. Traditional lenders may have a more trustworthy track record, but online lenders offer convenience and accessibility to a wider range of borrowers. Regardless of where you choose to get an unsecured business loan, it is crucial to thoroughly research and understand the interest rates, fees, and overall cost of the loan. With this knowledge, you can make an informed decision and secure the best loan for your business needs. Don’t let the lack of collateral hold you back from obtaining the financing you need – explore your options and take the necessary steps to grow and succeed as a business owner.
Key takeaways
1. Unsecured business loans allow business owners to obtain financing without collateral.
2. Traditional lenders, such as banks and credit unions, offer in-person services and have a reputable track record, but their eligibility requirements can be strict.
3. Online lenders, while more accessible and convenient, often have higher interest rates and fees compared to traditional lenders.
4. It is important for business owners to carefully consider the interest rates, fees, and overall cost of the loan when deciding where to obtain an unsecured business loan.
Meta description
Learn about unsecured business loans and their pros and cons. Find out where to get them, including traditional lenders and online lenders.
One sentence summary
Unsecured business loans, which do not require collateral, can be obtained from both traditional lenders like banks and credit unions as well as online lenders, although the latter often come with higher interest rates and fees, and borrowers should consider these factors, along with their own business needs and credit score, when choosing a lender.
Three sentence summary
Unsecured business loans offer financing without the need for collateral, making them attractive for business owners without assets. However, these loans can have stricter eligibility requirements and higher interest rates. Both traditional lenders like banks and credit unions, and online lenders offer unsecured loans, each with their own pros and cons.
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