Unsecured Business Loans: No Collateral? No Sweat

If you own a small business, getting an unsecured business loan means you don’t need to worry about having collateral to secure the loan. That can be especially useful if your company is a startup.

Numerous alternative lenders offer unsecured business loans. These lenders base approval on the strength of your business, annual revenue, operating history and, to a lesser extent, your personal credit score — and they don’t require collateral. Although you’ll likely pay more for this type of loan, the higher approval rates, speed and convenience could make it worth the extra cost for your small business.

Here are a few options for small-business owners seeking an unsecured business loan or line of credit, and the qualifications required by each lender.

 

Unsecured business loans at a glance

Lender (Scroll to right)
Collateral required?	No*	Only on loans over $100,000	No	No**	No
Personal guarantee required?	Yes	Yes	No	Yes	Yes

*OnDeck’s line of credit does not require collateral or a lien on your business assets, but its term loans require a lien.

**Dealstruck does not require collateral but requires a lien on your business assets.

 

Best unsecured line of credit
for bad personal credit: OnDeck

Loan amount: Up to $100,000 APR: 14% to 36% Loan term: repaid weekly for 6 months Approval time: decisions within minutes; funding in as little as 24 hours Read our OnDeck review.

Learn More Apply on OnDeck’s secure site

With a minimum personal credit score of just 600, OnDeck’s unsecured business line of credit is a good option for entrepreneurs with bad credit. The caveat is no bankruptcies in the last two years. You’ll also need to have been in business for at least one year with, at minimum, $200,000 in annual revenue. Unlike OnDeck’s term loans, its lines of credit do not require a lien on your business’s assets.

Best unsecured business loans
for expansion: Lending Club

Loan amount: $15,000 to $300,000 APR: 8% to 32% Loan term: 1 to 5 years Approval time: less than a week for funding Read our Lending Club review

Learn More Apply on Lending Club’s secure site

To qualify for Lending Club’s unsecured business loans, small-business owners need to have been in business at least two years, earn at least $75,000 in annual revenue, own at least 20% of the business, have fair or better personal credit and have had no recent bankruptcies or tax liens.With Lending Club, you can borrow up to $300,000. Only loans and lines of credit above $100,000 require collateral, although you’ll still need to provide a personal guarantee, regardless of the amount borrowed.

Best unsecured business line of credit
for working capital: Kabbage

Loan amount: $2,000 to $100,000 APR: 20% to 113% Loan term: 6 months Approval time: a few minutes to several days Read our Kabbage review

Learn More Apply on Kabbage’s secure site

Kabbage provides unsecured lines of credit between $2,000 and $100,000. Unlike your other borrowing options, Kabbage does not require a personal guarantee, and it does not have a minimum credit score to qualify. You’ll need to have been in business a minimum of one year, have annual revenue of at least $60,000 and have a business checking or PayPal account.

Best unsecured business line of credit
for businesses with invoices: Dealstruck

Loan amount: up to $250,000 APR: 11% to 22% + prime rate Loan term: 6 months per draw Approval time: Prequalification in minutes, offer letter in 2-3 days, average of 10 days to funding Read our Dealstruck review

Learn More Apply on Dealstruck’s secure site

Dealstruck offers three financing products: a term loan, which provides $50,000 to $250,000; an asset-based line of credit, which provides up to $500,000, depending on the value of your invoices; and an inventory line of credit, with which you can finance 100% of your inventory purchases up to $500,000. Dealstruck doesn’t technically require collateral, but the company does require a personal guarantee and takes a lien on your business assets. To qualify, you’ll need to have a personal credit score of at least 600, have been in business at least one year, earn at least $12,500 a month in revenue and be profitable.

Best unsecured business loans
for startups: Prosper

Loan amount: $2,000 to $35,000 APR: 6% to 36% Loan term: 3 to 5 years Approval time: Full approval and funding in 2-14 days Read our Prosper review.

Apply on Prosper’s secure site

You can borrow up to $35,000 in the form of a personal loan and use it for business purposes through this peer-to-peer lender. The potential benefits include a fast and easy application, fast funding (three to 14 days from approval), a low APR (6% to 36%) and flexible repayment terms. No collateral or business history are required, but you’ll need a personal credit score of at least 640 to qualify.

Two other options: MCAs and business credit cards

One form of unsecured business loan is a merchant cash advance, a type of financing that provides an upfront sum of cash, repaid daily from a fixed percentage of your credit and debit card sales. However, sky-high borrowing costs (typically 70% to 350% APR) make MCAs a last-resort option for small businesses.

An unsecured line of credit also can come in the form of a business credit card. Small-business owners can typically get a credit limit of $25,000 to $100,000, although this will depend on your personal credit score and your business revenue. Business credit cards offer numerous benefits (rewards for spending, 0% interest promotions and security features) but also typically carry numerous fees and may have a higher APR than those of some alternative lenders.

Unsecured business loans: the bottom line

Unsecured business loans will likely carry a higher APR than secured business loans, but they come with higher approval rates and faster funding. Although you don’t need collateral to qualify, you may still need to show strong business revenue and several years of operating history and have fair or better personal credit — though this will depend on each individual lender’s requirements.

Find and compare the best small-business loans

NerdWallet has come up with a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business, so that you know which loans you qualify for.

Compare business loans

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

To get more information on and compare funding options for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

This post was updated Dec. 22, 2015. It was originally published Nov. 10.

---

Image via iStock.