Unsecured Business Loans: Best Options and How to Get One
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How much do you need?
What is an unsecured business loan?
How do unsecured business loans work?
Types of unsecured business loans
Business term loans
Business lines of credit
Invoice factoring
Merchant cash advance
Best unsecured business loan options
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Pros and cons of unsecured business loans
Pros
Fast access to funds.
No physical collateral required.
Startups and borrowers with bad credit may qualify.
Cons
Typically higher APRs than secured business loans.
Personal guarantee or UCC lien likely required.
Less favorable terms (e.g., lower loan amounts, shorter repayment terms).
How to get an unsecured business loan
1. Determine your financing needs
2. Evaluate your business’s qualifications
3. Compare lenders
4. Submit an application
- Basic information about you and your business.
- Business and personal tax returns.
- Business and personal bank statements.
- Financial statements.
How to compare unsecured business loans
- 💵 Loan amount. Some lenders may not offer the full amount you need. If you borrow less than what you need to fund your business goals, you may risk falling short of revenue targets, making it harder to pay off the loan.
- 📈 Interest rate and fees. These can vary widely across lenders. Compare each loan’s APR, which includes both the interest rate and any upfront fees.
- ✍️ Guarantee requirements. While unsecured loans don’t require specific business assets as collateral, you’ll likely have to agree to a personal guarantee and/or Uniform Commercial Code lien. Make sure you understand the risks before signing.
- 🗓️ Repayment terms. The length of your loan and payment frequency vary by lender. Make sure your business has sufficient cash flow before committing to frequent payment terms or shorter loan terms. Ask about prepayment penalties, which some lenders charge if you repay early.
Alternatives to unsecured business loans
- SBA loans. If you only need $50,000 or less, an SBA 7(a) Small loan, SBA Express loan or SBA Export Express loan may not require collateral. But if you need more than that, SBA lenders may require it. Read more about SBA loan collateral requirements.
- Personal loans. If you have strong personal credit and need a smaller amount of financing, an unsecured personal loan may help you get funds for your business without putting up collateral.
- Business credit cards. For newer businesses without collateral, steady revenue or an extensive track record, business credit cards can help cover small, daily expenses or unexpected costs. However, interest charges can add up quickly if you carry a balance.
- Small-business grants. While competitive and unlikely to cover all your funding needs, grants provide free money for eligible businesses. NerdWallet offers a comprehensive list of small-business grants to help you get started.
Frequently asked questions
Do banks give unsecured business loans?
Is it hard to get an unsecured business loan?
What happens if you default on an unsecured business loan?
Do unsecured business loans improve business credit?
Article sources
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
Transparency of rates and terms.
Flexible payment options.
Fast funding times.
Accessible customer service.
Reporting of payments to business credit bureaus.
Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
- What is an unsecured business loan?
- How do unsecured business loans work?
- Types of unsecured business loans
- Best unsecured business loan options
- Pros and cons of unsecured business loans
- How to get an unsecured business loan
- How to compare unsecured business loans
- Alternatives to unsecured business loans
- Frequently asked questions