Top 15 Best Unsecured Business Loans
No one likes to feel insecure or to leave their home or valuables in an unsecured state. However, when it comes to business loans, a lack of security can actually be a good thing. While we certainly want you to maintain a healthy self-esteem in your personal life and to lock your front door, you should know that unsecured business loans have certain advantages. An unsecured loan means the loan requires no specific collateral on your assets. This may be beneficial if you don’t have any significant business possessions, have collateral but don’t want to risk losing it, or don’t want to tie up your assets with liens, which can make it difficult to obtain additional financing.
Now, here comes the confusing and potentially misleading part: a lot of so-called “unsecured” loans do require collateral, just not specific collateral. So, even if you don’t have to offer up your restaurant’s kitchen equipment as collateral, you may have to agree to a blanket lien on all your business assets and/or sign a personal guarantee (which means you’re personally financially responsible in the event that you don’t pay off your business loan).
A personal guarantee really isn’t such a negative thing – you’re surely planning on repaying your loan already, and if your business is a sole proprietorship (as are most small businesses), you are personally responsible for all business debts and liabilities anyway. However, an unsecured loan requiring a blanket lien, often referred to as a “UCC-1 lien,” a “general lien,” or a “general blanket lien,” is truly no less risky for the borrower than a “secured” loan requiring specific collateral; in some ways, it’s worse, because the lender has the power to seize any and all of your assets if you default. With that said, this type of loan may be the only option for businesses that don’t have any significant business assets to speak of, and therefore can’t qualify for a traditional (secured) loan.
Okay, now that we’ve got all those pesky disclaimers out of the way, here’s our list of the best unsecured business loans for small businesses. I’ve noted if the loan entails a UCC lien or personal guarantee. I’ll also talk a little bit about “self-securing” loan options.
|Startups with fair-to-good credit (personal loan)||LendingPoint|
|Businesses that want more time to pay for purchases (purchase financing)||Behalf|
|Startups with fair-to-good credit (personal loan)||Upstart|
|PayPal sellers who process at least $15K/year (short-term loan)||PayPal Working Capital|
|Startups with fair-to-good credit (personal loan)||Prosper|
|Startups with fair-to-good credit (personal loan)||Lending Club Personal Loans|
|B2B/B2C startups with bad credit, cash flow problems (invoice financing, line of credit)||Fundbox|
|Established businesses that accept Amex or have an Amex business card (short- & medium-term loans)||Amex Business Loans|
|Semi-established businesses with bad credit (short-term loan)||LoanBuilder|
|Established businesses with bad credit (medium-term loan)||Lending Club Business Loans|
|Established businesses with bad credit, cash flow problems (line of credit)||Kabbage|
|Established businesses with fair-to-good credit (line of credit, invoice factoring)||BlueVine|
|Established businesses with fair credit, healthy cash flow (short-term loan)||IOU Financial|
|Established businesses with bad credit, healthy cash flow (short-term loan)||QuarterSpot|
|Semi-established businesses with fair credit, healthy cash flow (short- & medium-term loans, contract financing)||StreetShares|
Table of Contents
- Unsecured Business Loans For Startups
- Unsecured Business Loans For Established Businesses
- How To Choose A Lender
- What You Need To Apply For A Business Loan
- Compare Unsecured Loan Providers
- Final Thoughts
Unsecured Business Loans For Startups
Getting a business loan once meant you had to go to a bank and list all of your qualifications and collateral; this is no longer the case. Today, there are many innovative financing products that even startups without any business experience or assets to speak of can qualify for. While more established businesses will likely find better rates and terms with a traditional business lender, startups without collateral should look into the following unsecured loan products.
LendingPoint is an online lender offering personal loans requiring no collateral. There is also no blanket lien or personal guarantee to sign. For new companies that need a small loan but do not have much (or any) time in business, collateral, or business revenue, a personal loan such as this one can be a good idea. LendingPoint also does not require you to have good credit—though it can’t be very bad, either. This lender targets individuals with credit in the “fair” range (600s).
LendingPoint personal loans are short-term installment loans that can be used for business. These loans are offered at $2,000–$25,000 and if approved, you can receive the funds as soon as the next business day.
To qualify for a personal loan from LendingPoint, you MUST meet the following qualifications:
- Fair personal credit (score of 600–680)
- At least 18 years of age
- Have an eligible ID and SSN
- Have an annual income of $20K or above
- Have a verifiable bank account
There are no requirements as to business income or time in business. However, LendingPoint may also look at your job history and financial history.
Behalf is a unique financial service offering “credit on demand” for small businesses. Behalf will finance your business purchases so that you can pay for things like inventory, equipment, and other expenses in weekly or monthly installments. With this startup-friendly service, Behalf pays your vendors upfront, and then you pay back Behalf over time. This type of financing could be described as somewhere in between a credit card and a traditional loan. Behalf does not require you to put up any collateral or blanket lien, but you will need to sign a personal guarantee.
Qualified businesses can borrow from $300–$50,000 from Behalf, with a term as short as 30 days or as long as 6 months. Note that you can use Behalf funds to pay for new business purchases, but you can’t use it to pay bills or pay off existing debt.
As you can see, there are not any significant business qualifications required to qualify for Behalf financing:
- Credit score: N/A (but they will do a “hard pull” on your credit)
- Time in business: N/A
- Business revenue: N/A
Be aware that even though Behalf doesn’t have any specific requirements as to credit history or business revenue, they will want to see that there are no major red flags in your credit history or business finances before approving your loan.
Upstart sells personal loans that can be used for business. These are medium-term installment loans ranging from $5,000–$50,000 that you can take as long as 5 years to pay off. Upstart loans do not require any collateral, blanket lien, or even a personal guarantee. Upstart is primarily geared toward consumers and not businesses, but their loans are appropriate for startup businesses without significant business qualifications or assets.
You need to meet the following qualifications to be approved for an Upstart loan:
- Have a personal credit score of 620 or higher
- Be a US citizen (not living in West Virginia or Iowa)
- Be at least 18 years old (19 in Alabama and Nebraska)
- Have an email account
- Have a name, date of birth, and social security number
- Have a regular source of income
- Have a bank account
Upstart has no time-in-business or business revenue requirements, as these are personal loans. However, if you have completed higher education and have a good job history, those factors can work in your favor to help you get a better rate from Upstart.
4. PayPal Working Capital
PayPal offers several lending products for businesses. One startup-friendly, unsecured business loan option that doesn’t require any collateral (no lien or personal guarantee either) is a PayPal Working Capital loan. These are short-term loans that function similarly to merchant cash advances and are repaid as a percentage of your daily PayPal sales. PPWC loans are only available to PayPal sellers.
PayPal will loan you up to 25% of your annual PayPal sales, up to $97,000 on your first loan. You will have up to 18 months to repay the loan. Taking out a PayPal Working Capital loan is a probably only good idea only if you process a significant, regular amount of sales on PayPal; the less PayPal is able to deduct from your sales each day, the higher your fee will be. With that said, it’s a viable option for someone with a young business or someone who has bad credit but does a lot of business on PayPal.
Here is what you need to qualify for a PayPal Working Capital Loan:
- Have a PayPal Business or Premier Account open for at least 3 months
- Process $15K annually on PayPal Business account or $20K annually on Premier account
- Credit score: N/A
PayPal does not check your credit history when evaluating your Working Capital Loan application.
Prosper is another online lender in the personal-loan-for-business game. With Prosper’s medium-term installment loans, you can borrow $2,000–$40,000 with a 3–5-year term. These loans have no collateral stipulations but do require you to sign a personal guarantee (though since it’s a personal loan and not a business loan, you would be personally responsible for repaying the loan regardless).
Prosper does not require any time in business or business revenue. However, they will look at your personal creditworthiness.
Here’s what you need to qualify for a Prosper loan:
- A credit score of at least 640
- A debt-to-income ratio below 50%
- A source of income
- No bankruptcies in the last year
- Fewer than 7 credit inquiries in the last 6 months
- Minimum of 3 open trades on your credit report
- Minimum credit history of 2 years
If you have very good or excellent credit, this will work to your advantage to help secure you a lower interest rate from Prosper.
6. Lending Club Personal Loans
Lending Club has several unsecured financing products, including both business loans and personal loans, as well as business lines of credit. Lending Club’s medium-term personal installment loans do not need to be secured with any collateral and are available to startups without any time in business or business revenue.
Lending Club Personal Loans (which can be used for business) let you borrow up to $40K. These loans are completely unsecured with no collateral, no blanket lien, and no personal guarantee. You even have the option to repay your loan by check if you don’t want ACH repayments coming out of your account automatically (automatic clearinghouse –ACH — repayments are a common practice among unsecured lenders, as they help to counteract the risk of lending with no collateral.)
Here are the borrower qualifications you’ll need to meet to qualify for a Lending Club Personal Loan:
- Personal credit score of at least 600
- Solid debt-to-income ratio with no more than 3 trade lines open
- Credit history of at least 3 years
- Time in business: N/A
- Business revenue: N/A
Fundbox is a popular online business lender offering several small business financing services: Direct Draw (line of credit), FundBox Credit (invoice financing), and Fundbox Pay (purchase financing similar to Behalf). No blanket lien is required, and on its website, Fundbox states that it requires no personal guarantee “for lower credit limits.” In the past, FB has offered the option to sign a personal guarantee in exchange for a higher credit limit, though that offer is not currently on the table for new users.
Fundbox’s borrowing rates are higher than those of some other online lenders, but they could be a suitable choice for B2B businesses with unpaid invoices and businesses with bad credit who need quick cash. The borrower qualifications are also very easy to meet. This lender only lets you borrow up to $100K, however.
Here are the borrower qualifications you must meet to apply for Fundbox’s short-term line of credit and invoice financing services:
- Have been using compatible accounting/invoicing software for at least 2 months, or a compatible bank account for at least 3 months
- $50K/year in business revenue
- No specific credit score requirement
In our Fundbox review, you can find the list of software compatible with Fundbox.
Unsecured Business Loans For Established Businesses
Whereas new businesses can get unsecured financing mostly in the form of personal loans and short-term loans, established businesses with at least 6–12 months in business have more unsecured loan options, including lines of credit and some medium-term loans. Compared to startups, established businesses can also usually qualify for larger amounts of financing.
8. American Express Business Loans
You probably already know about American Express’s excellent line of business credit cards, but what you may not realize is that American Express also offers several unsecured loan options. AMEX business loans, available to merchants that accept American Express and merchants who are AMEX cardholders, include Merchant Financing loans (short-term loans similar to merchant cash advances) up to $2 million, short-term Working Capital loans up to $750,000, and medium-term Business Loans up to $50,000. None of these loans require any collateral, but a personal guarantee is needed for smaller Merchant Financing loans in amounts of $35,000 or less.
Generally, AMEX’s loans are fast, fairly priced, and convenient—especially if you already do a lot of business with American Express. AMEX is also known for its great customer service and the loans arm of the business is no exception.
Here are the borrower requirements for American Express Business Loans:
- 24 months in business
- $50K annual business revenue
- Credit score: Unknown
You’ll also need to be an American Express Business Card holder for Working Capital and Business Loans. For Merchant Financing, you’ll need to accept American Express cards. Depending on the product, you may also need to process at least $12,000 in card-based sales annually.
9. LoanBuilder: A PayPal Service
In addition to PayPal Working Capital’s short-term loans for PayPal sellers, PayPal also offers short-term loans that can be used by most businesses—regardless of whether they are PayPal sellers—in the form of LoanBuilder loans. Compared to PayPal Working Capital, LoanBuilder also offers higher possible borrowing amounts, up to $500K. These loans don’t have any specific collateral requirements but you will need to sign a blanket lien and personal guarantee.
LoanBuilder loans are pretty easy to understand and apply for. You can even customize your loan during application using an online tool that lets you adjust the term length and borrowing amount, and see how those changes would affect your weekly payments.
Here’s what you need to qualify for a LoanBuilder loan:
- 9 months in business
- Credit score of 550
- $42K/year in business revenue
Be forewarned that you’ll need to repay your LoanBuilder loan at speed and each of your repayments will be a sizable amount, as the maximum term length is 12 months. However, given the fact that you can see your prospective payments before you accept the loan offer, you’ll at least know exactly what you’re getting into before you sign on the dotted line.
10. Lending Club Business Loans
Like the company’s personal loans, Lending Club Business Loans are unsecured, with no specific collateral requirements. However, Lending Club Business Loans do require a personal guarantee, and you will also have to sign a blanket lien on loans of $100K or more. Lending Club is a reputable, established lender (and in fact was one of the first online lenders, ever) and even though you may have to sign a personal guarantee and/or lien, you can trust Lending Club not to screw you over with hidden fees or misleading advertising.
LC’s business loans are structured as installment loans with fixed monthly payments and no prepayment penalty. Term lengths are from 1–5 years and you can borrow from $5,000–$300,000.
Here are the borrower requirements you need to have before applying to a Lending Club Business Loan:
- 12 months in business
- Business revenue of $50K/year
- Credit score: Not specified
In addition to the above requirements, you must be at least 18 years old, a citizen or long-term resident of the United States, and own at least 20% of the business. Your business also must not have any recent bankruptcies or tax liens.
Kabbage offers unsecured online lines of credit up to $250K, with a 6- or 12-month draw term. This LOC requires zero collateral—no blanket lien and no personal guarantee. Kabbage’s borrower qualifications are quite low, and the application process is so fast that you could potentially get approved and start withdrawing funds within minutes. Kabbage provides, without a doubt, the easiest-to-access business line of credit on the market. Unsurprisingly, all this convenience comes at a price: APRs range from 24%–99%.
Kabbage could be a good choice if you are a merchant in need of fast capital, especially if you don’t have great credit or your cash-flow varies a lot within the course of a month. Kabbage allows monthly repayments, a refreshing anomaly in the online financing space. Just be aware that you’ll be paying off a sizable chunk of your principle, plus a 1.5–10% draw fee each month.
Here’s what you need to qualify for a Kabbage LOC:
- 12 months in business
- Business revenue of $50K/year (or at least $4,200 for the last 3 months)
- Credit score: N/A
Be aware that even though Kabbage doesn’t have a minimum credit score cutoff, they will perform a hard pull on your credit during the application stage, and will use your credit history to help verify your identity and determine what rates to charge you.
Kabbage also recently started offering an invoice financing service that lets your customers apply for Kabbage financing by pasting a link to each of your outgoing invoices. Whether your customer can use this financing service and how much they’re approved for depends on the customer’s business’s qualifications, not your own.
BlueVine is another highly received online line of credit provider. While they may not have the lowest rates in town, they have transparent advertising and good customer service. This financing is also unsecured, in that it doesn’t necessitate any specific collateral, though borrowers must sign a blanket lien and a personal guarantee.
It’s unfortunate that BlueVine requires a blanket lien, but BV’s 6-month line of credit, offered at up to $250K, has some of the lowest borrower qualifications we’ve seen for lines of credit. If your business struggles with cash-flow problems but can’t qualify for a bank line of credit, BlueVine is worth checking out.
Here are the borrower qualifications for BlueVine’s 6-month line of credit:
- 6 months’ time in business
- Personal credit score of 600
- $120K/year in business revenue
To qualify for BlueVine’s 12-month line of credit, your business must be an LLC or a corporation; sole proprietors are not eligible. You’ll also need to make $500K/year and have a credit score of 650 or above. However, if your annual revenue is over $900,000, they’ll accept a score as low as 620.
BlueVine additionally offers unsecured invoice factoring services which might appeal to businesses that have unpaid invoices. Those services are available even if you have bad credit (minimum score 530) and have only been in business 3 months, as long as you make $100K/year.
If you’re thinking that BlueVine sounds similar to Fundbox and Kabbage, you’re right! Find out how these online LOC/invoice financing services compare to one another here: BlueVine VS Fundbox and Fundbox VS BlueVine.
13. IOU Financial
This online lender sells unsecured short-term installment loans of up to $300K, with no collateral. Borrower qualifications are relatively low, and interest rates are fairly reasonable compared to those of other short-term lenders.
While IOU Financial does require a personal guarantee, they do not ask you to sign a blanket lien. They take daily ACH repayments from your business bank account, so applicants should make sure they have a solid cash-flow to support these repayments.
Here are the borrower qualifications you must meet to qualify for an IOU Financial loan:
- 12 months in business
- Credit score of 600
- Business revenue of $120,000 per year and $3,000 avg. daily balance over a 3-month period
The application process for IOU Financial is fast and painless, and if you have all your documents ready to go—see the section below on What You Need to Apply For A Business Loan—you can potentially get funded within a day or two.
QuarterSpot is an online lender specializing in short-term loans up to $250K. QuarterSpot loans are unsecured and only require a personal guarantee. QuarterSpot’s capital can be expensive, but what distinguishes QuarterSpot from most other short-term lenders is that you can save money by repaying the loan early. QuarterSpot also lends to businesses with bad credit.
These are the borrower qualifications you must meet to get funding from QuarterSpot:
- Credit score of 550
- $200K in annual revenue
- 12 months in business
- $2,000+ average daily balance
- An average of 10 or more revenue-producing deposits per month.
- No bankruptcies within the last two years.
- $100,000 or less in tax liens
- A maximum of two high-frequency loans if you qualify
QuarterSpot cannot currently lend to businesses located in North Dakota, Rhode Island, South Dakota, or Vermont. U.S. Territories (Puerto Rico, Guam, U.S. Virgin Islands, Northern Mariana Islands) are also prohibited.
Streetshares is a highly rated lender offering short- and medium-term loans and lines of credit up to $250K, and contract financing up to $500K. Streetshares funds loans via an online peer-to-peer (P2P) marketplace and is veteran-friendly. It’s a good option to get fast financing if you don’t necessarily have the qualifications for a bank loan (either because you haven’t been in business long enough or don’t meet the credit requirements) but have at least fair credit and a healthy cash-flow.
Streetshares does require that borrowers have a business guarantor—kind of like a cosigner for the loan—but no specific collateral and no blanket lien. Streetshares term loans and lines of credit do necessitate a personal guarantee, but no guarantee is required on contract financing.
StreetShares borrower requirements are as follows:
- Personal credit score of 620
- 12 months in business (or 6 months if you’ve already made $100K)
- Business revenue of $100K/year
How To Choose A Lender
Once you have a list of loans you are interested in and eligible for, you can prequalify for loans and compare initial offers. With these offers, you can narrow down the list further by comparing the important attributes of each loan. Some crucial things to consider include:
- Typical time-to-funding (how soon you’ll get the money after applying)
- The loan’s APR or factor rate (total cost you’ll pay for the loan)
- How long you have to repay the loan
- How much each loan payment will be
- Whether there is an origination fee (an amount that is taken from the loan total upfront)
- Whether there is a prepayment penalty (on short-term loans)
- Any other fees and their amounts
- The lender’s overall reputation
If you have a few basic pieces of information about a loan you’re considering (total loan amount, repayment frequency, interest rate, etc.), you can use one of our small business loan calculators to determine both how much your payments will be and the total cost of your loan.
It’s important to understand all the pertinent information about a loan’s terms before you accept an offer. If you can’t find much specific information about a business loan, even after you prequalify, this is a bad sign.
To save time comparing lenders, you might want to use a loan aggregation service like Lendio, which lets you prequalify for and compare several loan offers at once.
What You Need To Apply For A Business Loan
Borrower requirements for business loans inevitably vary from one lender to the next. However, most business lenders will want to see that you have a few key things:
- A legal business entity (e.g., an LLC)
- Business bank account
- Business tax ID number
- Business phone number and website
- Vendors that report to credit bureaus
Additionally, you’ll need to meet the requirements for credit score, time-in-business, annual revenue, and other requirements as outlined for each lender above.
As far as which documents you need to apply for a business loan, you’ll again want to check details about the specific loan for which you’re applying. Odds are good that you will need to have at least the following:
- Business license
- Business lease
- Business bank statements for the past 3 months (or longer)
- Business financial statements including Profit & Loss and Income Statement
- Personal income tax returns for the past 3 years
- Outline of business expenses
- A business plan that explains how you will use the loan
If you’re applying for a personal loan, you will not need to show most of these things. Still, it’s a good idea to keep business and personal finances as separate as possible.
Before applying for a business loan, you should also check your credit report, make an effort to improve your business credit score (or your improve your personal credit score if you’re applying for a personal loan), and be aware of any judgments or liens on your business.
Compare Unsecured Loan Providers
Here’s a quick breakdown of the unsecured loan providers I talked about above. Again, while none of them require specific collateral, many do require a personal guarantee and some also require a blanket lien.
No blanket lien or personal guarantee needed:
- Lending Club Personal Loans
- IOU Financial
- Fundbox (personal guarantee is optional)
- Amex Business loans (for loans over $35K)
Personal guarantee only:
- Amex Business Loans (for loans $35K or less)
- Lending Club Business Loans (for loans under $100K)
- IOU Financial
Blanket lien and personal guarantee:
- Lending Club Business Loans (for loans $100K or more)
Which of these lenders will really get you the best deal? That will differ from one business to the next. To find out which unsecured loan might work best for you, there’s no harm in applying to multiple lenders get preapproved. This way, you can compare multiple loan offers at the same time with no commitment or damage to your credit (most preapprovals only entail a soft credit pull).
Unsecured loans are not without risk. Lenders try to mitigate this risk by tacking on higher interest rates and withdrawing loan repayments directly from your bank account, often on a daily basis. Please also be forewarned that even if a lender doesn’t require a blanket lien or personal guarantee, they can still sue you if you don’t pay and seize your assets that way.
So to sum up, you shouldn’t choose an unsecured loan because you think it will protect your assets; rather, this loan type is more appropriate for businesses that don’t have much to offer up as collateral and therefore can’t qualify for a secured loan. However, for many newer and less-creditworthy businesses that are shut out of the traditional lending market, unsecured financing can be a godsend.
Have a question about any of these unsecured loan options? Contact us in the comments and we’ll do our best to get back to you with an answer.