Top 10 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 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 I’ve got all those pesky disclaimers out of the way, here’s my list of the top 10 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.
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Streetshares (see our review) is a highly rated lender offering short- and medium-term loans, lines of credit, and contract financing. Streetshares funds loans via an online peer-to-peer (P2P) marketplace and is especially veteran-friendly. It’s a good option to get fast financing if you don’t necessarily have the qualifications for a bank loan (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.
Loans are repaid via automatic clearinghouse (ACH) payments, which take money from your account directly. ACH repayments are a common practice among unsecured lenders, as this helps counteract the risk of lending with no collateral.
Read our StreetShares review for an in-depth take on this lender, or click the logo to visit the official StreetShares website and apply for financing.
OnDeck (see our review) is a convenient and popular online lender with a generally positive reputation among its borrowers. This lender offers short-term installment loans up to $500K and lines of credit up to $100K. These loans are unsecured insofar as they don’t demand any specific collateral, but you will have to agree to a blanket lien and personal guarantee. Repayments are made via daily or weekly ACH withdrawals.
The main benefits of using OnDeck are that it’s quick and borrower requirements are low – you only have to have a credit score of 500, $100K in annual revenues, and one year’s time in business to qualify. If you are a newer business with decent cash flow and not much in terms of assets, OnDeck is a solid choice in the short-term loans space, which, in general, is filled with lots of shadeballs. OnDeck is not a shadeball, but they do carry higher interest rates than some other (secured) lenders and require a blanket lien.
Overall, we like OnDeck. You can read our full OnDeck review to find out why we rate them 4.5/5 stars. Or, click on their logo to go to their official website.
BlueVine (see our review) the other lenders discussed so far, they are highly received in the industry. 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.
Yes, it’s too bad that BlueVine requires a blanket lien, but it has some of the lowest borrower qualifications we’ve seen for lines of credit, which are offered at up to $5M. If your business struggles with cash flow problems but can’t qualify for other lines of credit, BlueVine is worth checking out.
Read our BlueVine review or click on the BlueVine logo to learn more about their borrower qualifications and other specifics.
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 which need quick cash. This lender only lets you borrow up to $100K, however.
Invoice financing, like the service Fundbox offers, is a type of financing in which you receive funds based on the value of your unpaid invoices. Actually, this type of financing can be considered “self-securing”, as your customers’ invoices are the collateral.
Fundbox’s line of credit product, “Direct Draw,” is a newer offering that is not dependent on a business’s unpaid invoices. Any business that has been using a Fundbox-compatible business bank account for at least 6 months is eligible to apply.
Read our Fundbox review to see why we give them 4.5/5 stars. If you like what you read, click the logo to visit their official website and get started with your application.
Lending Club (see our review) is another P2P lender offering unsecured loans to small businesses that might not qualify for a bank loan. Lending Club offers medium-term business and personal installment loans, as well as business lines of credit.
Here’s the deal: 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—not even a 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. Score!
Lending Club Business Loans do require a personal guarantee, but no blanket lien, unless you borrow more than $100K. If you borrow $100K – $300K, you will have to sign a blanket lien.
Check out our Lending Club review for more details on these unsecured business loans, or click the company logo to visit Lending Club’s website and start your application.
This online lender sells unsecured short-term installment loans of up to $300K, with no collateral. Borrower qualifications are relatively low – 12 months in business, a credit score of 600, and $120K/year in income – and interest rates are fairly reasonable compared to those of other short-term lenders.
While IOU Financial (see our review) 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.
Read our IOU Financial review to learn about their rates and more.
Kabbage (see our review) offers unsecured online lines of credit up to $150K, with zero collateral – no blanket lien and no personal guarantee. Their borrower qualifications are quite low and the application process is so fast that you could potentially get approved and start withdrawing funds within minutes. Unsurprisingly, all this convenience comes at a price: APRs range from 18% – 106%.
Kabbage might be a good choice for merchants that need access to fast cash to make ends meet, even if they don’t have great credit. You also have the benefit of monthly repayments, a refreshing anomaly in the online financing space.
Check out our Kabbage review to find out more about their borrower qualifications, terms, fees, etc. Or, click their logo to get pre-approved for a Kabbage LOC today.
CapFusion (see our review) offers no-collateral short-term loans of up to $1 million. These are unsecured loans with no blanket lien and no personal guarantee. Woohoo! ACH repayments are collected either daily or weekly, depending on your agreement with CapFusion.
Overall, CapFusion is kind of expensive, but they offer some financial incentive for early repayment. They don’t care about your credit score, and time-to-funding is fast as heck. You can read our CapFusion review for more information on this short-term lender, or check out their site by clicking on the logo.
This alternative lender offers short-term loans and merchant cash advances, and they require no specific collateral. They do make you sign a blanket lien, however, and rates are on the higher side. But they have very lax requirements – to qualify for a merchant cash advance, all you need is one month’s time in business and $5K/month in credit card sales (and you can’t be in active bankruptcy). You can get this money as quickly as 24 hours from application.
With Cashbloom (see our review), you can get a loan or cash advance of up to $1 million. Of course, not every business will qualify for such a large loan. They determine how much you are qualified for depending on your “Bloomscore,” which is based on your monthly gross sales, time in business, credit score, and other factors. This lender especially caters to dental practices.
As with most other cash advance/short-term loans, repayments are made on a daily basis.
Read our Cashbloom review to learn more about this unsecured lender.
10. Crest Capital
Crest Capital (see our review) specializes in equipment financing. Like invoice factoring, equipment financing can be considered “self-securing” because the only collateral required is the equipment itself. So, you will not have to put up any of your assets as collateral, and the most you could lose in the event that you can no longer afford payments is the equipment you’re making payments on.
Crest Capital works with a variety of industries, but they are selective about the particular companies they do business with. To use Crest Capital equipment financing, you must have 2 years’ time in business and a credit score of at least 650.
Check out our Crest Capital review to find out why we rate them 4/5 stars.
Here’s a quick breakdown of the unsecured loan providers I talked about above. Again, while none of them require specific collateral, some do require a blanket lien or personal guarantee.
No blanket lien or personal guarantee needed:
- Lending Club Personal Loans
- IOU Financial
- Streetshares (contract financing)
Blanket lien and/or personal guarantee needed:
- Streetshares (term loans and LOC)
- Lending Club Business Loans
Self-securing (no lien or guarantee needed):
- Crest Capital
Which of these lenders will really get you the best deal? This differs 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 (at most, preapproval only entails a soft credit pull).
Though you can never go wrong with watching the HBO show Insecure, 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? Write me in the comments and I’ll do my best to get back to you with an answer.