An unsecured business loan doesn’t require collateral — such as business equipment, inventory or property — but you may still need to sign a personal guarantee to obtain this financing.
A personal guarantee gives a lender the right to go after your personal assets (think a home, car or cash) if you fail to repay unsecured debt. Similarly, some lenders may also file a Uniform Commercial Code lien on your business assets when you take out a loan, legally giving them the right to seize those assets if you can’t repay.
Unsecured business loans usually carry higher annual percentage rates than small-business loans that require collateral. But they can make sense if you don’t have collateral, and if you need fast funding since the application process requires less paperwork and fewer assessments. Here are our picks for the best unsecured business loans.
How Much Do You Need?
Our pick for
Unsecured business loans for bad credit
See Your Options
with Fundera by Nerdwallet
OnDeck - Line of credit
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with Fundera by Nerdwallet
Est. APR
11.00-61.90%
Min. Credit Score
600
OnDeck offers a fast line of credit for small-business owners with less-than-stellar credit who need to manage cash flow or buy inventory.
Pros
- Cash can be available within the same business day.
- Requires low minimum credit score.
- Less paperwork than most lenders.
Cons
- Fixed-fee structure means early repayment will not save interest.
- Requires weekly repayments.
- Requires personal guarantee.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 1 year.
- Minimum annual revenue: $100,000.
- No bankruptcies in the past 2 years.
May fund quickly
Our pick for
Unsecured business loans for everyday purchases
See Your Options
with Fundera by Nerdwallet
Fundbox - Line of credit
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with Fundera by Nerdwallet
Est. APR
10.10-79.80%
Min. Credit Score
600
Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly—accepts borrowers with a minimum of six months in business.
- Low minimum credit score requirement.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared to traditional banks.
- May require personal guarantee.
- Can’t be used to build business credit.
- Weekly repayments required over a short term (maximum of 24 weeks).
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 6 months.
- Minimum annual revenue: $100,000.
May fund quickly
Our pick for
Unsecured business loans for larger purchases
See Your Options
with Fundera by Nerdwallet
BlueVine - Line of credit
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with Fundera by Nerdwallet
Est. APR
15.00-78.00%
Min. Credit Score
600
BlueVine's line of credit provides fast working capital for short-term borrowing needs.
Pros
- Cash can be available within 12 to 24 hours.
- Multiple term lengths for different financing needs.
Cons
- May require weekly repayments.
- Requires personal guarantee.
- Not available in North Dakota, South Dakota or Vermont.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 6 months.
- Minimum annual revenue: $120,000.
May fund quickly
How Much Do You Need?
Summary of Best Unsecured Business Loans of January 2022
| Lender | Best For | Est. APR | Min. Credit Score | Next Steps |
|---|---|---|---|---|
OnDeck - Line of credit See Your Options with Fundera by Nerdwallet | Best for Unsecured business loans for bad credit | 11.00-61.90% | 600 | See Your Options with Fundera by Nerdwallet |
Fundbox - Line of credit See Your Options with Fundera by Nerdwallet | Best for Unsecured business loans for everyday purchases | 10.10-79.80% | 600 | See Your Options with Fundera by Nerdwallet |
BlueVine - Line of credit See Your Options with Fundera by Nerdwallet | Best for Unsecured business loans for larger purchases | 15.00-78.00% | 600 | See Your Options with Fundera by Nerdwallet |
What are unsecured business loans?
Unsecured business loans are a type of financing that doesn't require that you pledge physical collateral — like business equipment, inventory or real estate — to secure funding. However, most unsecured loans are backed by either a personal guarantee or UCC lien, even if physical collateral is not required.
A personal guarantee holds you personally responsible for the debt if your business cannot pay, and the lender can seize your personal assets to recover their losses in the case of default.
A UCC lien gives a lender the right to seize your business assets if you’re unable to repay your loan. Lenders typically file UCC liens with your secretary of state’s office after you sign your loan agreement. Your lender may file a lien on specific assets, or they might file a blanket lien, which allows them to seize any business assets necessary to recover their losses.
How do unsecured business loans work?
Unsecured business loans work like other types of debt financing, and it can come in several forms, including term loans, lines of credit, invoice factoring, and even merchant cash advances. Regardless of the type of business loan, unsecured financing can often offer faster funding with simpler application processes compared to secured loans.
Although these loans may be fast — and may protect your business assets from risk — they typically have higher interest rates and can require that you put your personal assets on the line to access financing.
How to get an unsecured business loan
You may be able to get an unsecured business loan from both traditional financial institutions, like banks and credit unions, and online lenders.
To qualify for an unsecured loan from a bank, you’ll likely need multiple years in business, strong personal credit and excellent annual revenue. In comparison, online lenders may have more flexible qualifications and can be faster to fund.
Government-backed SBA 7(a) loans offered by banks and other lenders may not need collateral if they're less than $25,000. But SBA loans do require an unlimited personal guarantee from anyone who owns more than 20% of a business.
Because obtaining an unsecured business loan doesn't require collateral, lenders will typically assess your personal creditworthiness when you apply for funding. They’ll also usually consider how many years you’ve been in business, as well as your annual revenue.
Compare small-business loans
For a look beyond unsecured loans, check out NerdWallet’s list of the best small-business loans for business owners. Our recommendations are based on the market scope and track record of lenders, the needs of business owners, and an analysis of rates and other factors, so you can make the right financing decision.
Last updated on November 15, 2021
To recap our selections...
Best Unsecured Business Loans of January 2022
- OnDeck - Line of credit: Best for Unsecured business loans for bad credit
- Fundbox - Line of credit: Best for Unsecured business loans for everyday purchases
- BlueVine - Line of credit: Best for Unsecured business loans for larger purchases