An unsecured business loan has an attractive advantage over a secured loan: Small-business owners don’t have to put up collateral.
When the loan is secured, assets you use as collateral are at risk — perhaps your home, your business equipment or inventory. If your business goes south and you can’t pay the loan, the lender can take those possessions.
Unsecured loans, on the other hand, place the burden of the risk on the lender. These loans will likely carry a higher APR than secured business loans, but they typically come with higher approval rates and faster funding. Although you don’t need collateral to qualify, you may still need strong business revenue, several years of operating history and fair or better personal credit — though this will depend on the individual lender’s requirements.
Here are five alternative lenders offering unsecured business loans or lines of credit of up to $100,000.
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Lending Club: Good choice for term loans or lines of credit with less stringent requirements than banks and competitive rates compared with other online lenders.
OnDeck: Solid choice for an unsecured line of credit for working capital needs and handling unexpected expenses.
StreetShares: Good choice for newer businesses and veterans who need smaller amounts of cash.
Kabbage: Good option if you have bad credit and need a working-capital line of credit fast.
Fundbox: Good choice if you have unpaid customer invoices and want to avoid a credit check.
If you want a term loan or line of credit with competitive rates: Lending Club
Lending Club is a good option for strong businesses that want competitive rates. The lender’s APR ranges from 8% to 32%, making its loans slightly more expensive than SBA loans but competitive with other online lenders. Lending Club also has less stringent requirements than banks, which typically require excellent personal credit and collateral to back loans. The lender requires a minimum 600 credit score and requires collateral only on loans and lines of credit greater than $100,000.
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If you need cash for working capital or unexpected expenses: OnDeck
OnDeck’s unsecured business line of credit is a good option for businesses that need working capital to manage cash flow or handle unexpected expenses.
With a credit line, you’ll have access to cash that you can borrow whenever you need it. Each individual draw on the line of credit is repaid weekly over a period of six months, and borrowers can choose to repay sooner to save on interest with no prepayment penalties. OnDeck’s line of credit doesn’t require a lien on your business’s assets, although you still have to sign a personal guarantee, which makes you personally liable for repaying the debt if your business fails to.
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If you’re a veteran or have a newer business and need a smaller loan: StreetShares
StreetShares is a good option for newer businesses and, in particular, veterans. The company was founded by veterans, and more than 60% of its borrowers are former service members. Check out some other small-business loan options for veterans.
StreetShares offers term loans of as much as $100,000, with no collateral or liens required. Borrowers should note that the maximum loan you can qualify for is 20% of your annual revenue. For example, if your business makes $300,000 per year, you can qualify for a loan of up to $60,000.
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If you need working capital and have bad credit: Kabbage
Kabbage is a good option for borrowers with bad credit who need fast cash for short-term expenses; the company does not have a minimum credit score to qualify. Funding is fast: Once approved, you can get access to funds immediately or, at most, within a few days. You’ll pay more for it, however, as Kabbage’s loan ranges from 32% to 108% APR. With a short repayment time frame and a higher annual percentage rate, it’s likely not your best option for a large expense, such a new piece of expensive equipment for your company.
Keep in mind that each new draw from the line starts its own six- or 12-month term with its own fee structure, so the cost of borrowing will increase.
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If you have unpaid invoices and want to avoid a credit check: Fundbox
If you have customers who pay you in 30, 60 or 90 days, Fundbox is a good option for invoice financing. The lender provides an unsecured cash advance (no collateral or personal guarantee required) for up to 100% of the value of your unpaid customer invoices. You can borrow from $500 to $100,000. The company provides instant approval, with funding typically in one to three business days. After receiving the cash advance, you’ll repay it in 12 equal weekly installments, plus a fee. If your customer ends up paying you before then, you can repay the advance in full to save on fees, with no penalties.
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Want to compare more small-business loan options?
NerdWallet has created a comparison tool for the best small-business loans to meet your needs and goals. We gauged lender trustworthiness and user experience, among other factors, and arranged lenders by categories that include your revenue and how long you’ve been in business, so that you know which loans you qualify for.
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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 theSmall Business section of NerdWallet’s Ask an Advisor page.
This post was updated on June 1, 2016. It was originally published Nov. 10, 2015.
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