Key takeaways
- No-collateral business loans don’t require you to pledge assets to qualify, but your personal and business assets could still be at risk.
- These loans may be a good fit for businesses without much physical collateral or those seeking fast funding.
- Expect higher interest rates, shorter repayment terms and lower borrowing limits.
Small-business loans are typically secured by collateral — such as real estate, vehicles, equipment, personal savings and more. This acts as a safety net for lenders, since they can take the collateral to cover loan costs if you default on loan payments.
Getting a business loan without physical collateral isn’t impossible, but you’ll usually have to pay higher interest rates and sign a personal guarantee or lien agreement.
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How to get a business loan without collateral
To get a business loan without collateral (called an unsecured business loan), you’ll usually need to offer something else to reduce the lender’s risk, such as:
- Personal guarantee. Signing one makes you personally responsible to pay back some or all of the borrowed funds in case your business can’t. This means you may need to tap into personal savings, draw from retirement accounts, sell personal assets or have your wages garnished to cover unpaid business debt.
- UCC filing. This gives lenders the legal right to claim some or all of your business assets to recover borrowed funds if you default, like inventory, equipment or accounts receivable.
Lenders often require both a personal guarantee and UCC filing, and they’re common practice among secured and unsecured business loans.
While requirements vary by lender, you’ll also likely need:
- A personal credit score in the mid-600s or higher.
- Annual revenue of $100,000 or more.
- At least 12 months in business.
- A strong business plan that explains how you’ll use the funds and repay the loan.
- Enough cash flow to comfortably handle loan payments. Many lenders like to see a debt-to-income ratio of 36% or lower, or a debt service coverage ratio of at least 1.25.
Who should consider a business loan without collateral?
Consider this type of funding if:
- Your business doesn’t have many assets. This is common among startups and service-based businesses like consulting firms.
- You need money fast. Because you don’t have to appraise assets before getting the loan — a process that can take weeks — these loans can be funded much faster.
- You want more control over your assets. When you pledge an asset as collateral, you may need your lender’s permission to sell it or make significant changes to it.
🤓 Nerdy Tip
Need to buy equipment or inventory? Consider equipment financing or inventory financing. These loans typically use the items you’re buying as collateral. Pros and cons of no-collateral business loans
Pros
Access to funding with limited assets.
Faster funding compared with secured loans.
Cons
Many come with higher interest rates and shorter repayment terms.
Borrowing limits may be lower.
Where to get small-business loans without collateral
The following are types of funding that don’t require traditional forms of collateral.
Online lenders
Best for: speed and convenience
Loans from online lenders are often easier to apply for and quicker to fund than bank or SBA loans, but high interest rates can make them more expensive. While they don’t all require collateral, borrowers may still have to sign a personal guarantee or agree to a blanket lien on their business assets.
Online loans can be a good alternative for business owners who don’t meet traditional banks’ loan requirements, but who still have personal credit scores above 600 and have been in business for at least six months.
Banks
Best for: low interest rates
Some banks offer unsecured financing through business lines of credit or term loans, with amounts that can range from $5,000 to $150,000. Term loans offer an upfront lump sum of money, while business lines of credit only require you to pay interest on the money you borrow, up to a preset limit.
Applying for a business loan through a bank is usually more rigorous and time-consuming than applying for an online loan.
SBA lenders
Best for: long repayment terms
For SBA loans of $50,000 or less, borrowers don’t need collateral. However, all SBA loans, regardless of the amount, require a personal guarantee from all business owners who own at least 20% of the business.
Unsecured SBA loans will most likely come in the form of a 7(a) loan, the most common type of SBA-backed funding, or a 504 loan that uses the property being purchased as collateral.
Small-business loans that don’t require collateral
| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 Bluevine - Line of credit Nerdwallet Rating with NerdWallet Small Business | $200,000 | 625 | with NerdWallet Small Business |
 Fora Financial - Online term loan Nerdwallet Rating with NerdWallet Small Business | $1,500,000 | 570 | with NerdWallet Small Business |
 OnDeck - Online term loan Nerdwallet Rating with NerdWallet Small Business | $400,000 | 625 | with NerdWallet Small Business |
 National Funding - Online term loan Nerdwallet Rating with NerdWallet Small Business | $500,000 | 600 | with NerdWallet Small Business |
 Rapid Finance - Online term loan Nerdwallet Rating with NerdWallet Small Business | $1,000,000 | 650 | with NerdWallet Small Business |
 Backd - Line of credit Nerdwallet Rating with NerdWallet Small Business | $750,000 | 650 | with NerdWallet Small Business |
 Fundbox - Line of credit Nerdwallet Rating with NerdWallet Small Business | $250,000 | 600 | with NerdWallet Small Business |
 Accion Opportunity Fund Small Business Working Capital Loan Nerdwallet Rating with NerdWallet Small Business | $250,000 | 620 | with NerdWallet Small Business |
 Bank of America Business Advantage Unsecured Term Loan Nerdwallet Rating with NerdWallet Small Business | $100,000 | 700 | with NerdWallet Small Business |
 Wells Fargo BusinessLine® Line of Credit Nerdwallet Rating with NerdWallet Small Business | $150,000 | 680 | with NerdWallet Small Business |
Self-collateralizing financing options
With the following funding options, the items being financed serve as the collateral for the loan. So although they aren’t technically unsecured business loans, these financing types often don’t require additional business or personal assets.
- Equipment financing: Small-business owners can use these loans to buy equipment for their business. The equipment being purchased typically serves as the collateral for the loan. Equipment financing is available from banks, online lenders or SBA lenders.
- Inventory financing: Entrepreneurs with retail stores or manufacturing businesses can apply for inventory financing to purchase items they’ll later sell or use to produce other products. Like with equipment financing, the inventory being purchased is generally used as collateral.
- Commercial real estate loans: Similar to consumer mortgages, the property you buy or refinance with a commercial mortgage usually serves as collateral for the loan.
- Invoice financing: Also known as accounts receivable financing, invoice financing lends business owners money against customers’ unpaid invoices. Similar to a cash advance, invoice financing is often easier to qualify for than a bank loan and can help manage short-term cash flow issues. However, depending on the terms of the agreement, unpaid invoices may only be able to stand in as collateral up to a certain point. If the client never pays their invoice, the owner might have to make up for the sunk cost themselves.
Frequently asked questions
Can you get a business loan with no collateral?
It’s possible to get a small-business loan without collateral, but it can be harder to get approved. There are additional requirements such as a personal guarantee, a UCC lien and higher interest rates.
How do I qualify for an unsecured business loan?
Requirements vary by lender, but generally it’s helpful to have strong personal credit, low business debt and well-established revenue and time in business.
