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Jun 06, 2024
5 min read
Last update: Jun 06, 2024

No-Collateral Business Loans: Tailored Solutions for Businesses

Every business needs capital to pay for labor, materials, property, and general operations. There are plenty of times when that capital isn’t available or when an influx of capital can provide a company-transforming boost. 

To meet that need for capital, borrowers turn to various funding methods, including the classic business loan. Unfortunately, lenders often require businesses to offer collateral or a UCC Lien in exchange for much-needed funds. 

That collateral can be anything from business assets to real estate and operational equipment—things many businesses need capital to purchase in the first place. So, how do businesses avoid collateral-backed secured loans? 

That’s at the center of our discussion today, as we cover everything you need to know about no-collateral business loans, from what they are to how to qualify for one, and even a few tips on managing your loan once approved. 

At SBG Funding, we specialize in no-collateral, unsecured business loans. We have options to suit your specific business needs and have some of the best rates you’ll find anywhere around. Apply today and get the working capital you need in as little as 24 hours! 

Exploring No-Collateral Business Loans

Like most personal loans, lenders tend to offer primarily secured business loans. That means small business owners must stake an asset as protection in case they default on payments. Those staked assets are collateral and can include vehicles, equipment, or property. 

Lenders use loans secured with collateral as a risk-management technique to seize assets to cover a defaulted loan. Some borrowers don’t have assets to stake or don’t like the idea of having business or personal assets tied to loan payments, so they search for no-collateral loans. 

No-collateral business loans are funds provided by lenders that do not require a staked asset. In exchange for no-collateral requirements, lenders use other mitigation tactics, like higher interest rates, added fees, extra verification, or strong credit history and revenue requirements. 

No collateral loans are valuable tools for business owners who need working capital to expand their operations, purchase startup inventory, or make strategic investments. They can also help manage cash flow gaps, allowing you to pay for expenses like payroll when funds are thin. 

In some cases, business owners may use unsecured small business loans to purchase or repair equipment. Unfortunately, the volatile nature of real estate makes these loans less than ideal for property.  

The Advantages of No Collateral Business Loans

While secured business loans may be the preferred option for traditional lenders, such as banks and credit unions, business owners find significant benefits to opting for a no-collateral loan. These benefits include:

  • A loan free from asset liability
  • Faster approval and funding
  • Greater flexibility for deploying funds
  • Various lending options to meet unique needs
  • Improvements to credit scores with proper management

When it comes to no-collateral business loans, an online financial provider outweighs a brick-and-mortar institution by providing better lending conditions, rates, and higher loan amounts. 

And among the best alternative lenders is SBG Funding, thanks to an 85% approval rating and 2,000+ five-star customer reviews. Apply for capital with SBG Funding today! 

Types of No-Collateral Business Loans

Borrowers have more funding options than ever before, and the various types of no-collateral business loan options are a testament to that fact. There is a lending option to meet the needs of your business, regardless of why you need the working capital. Here’s a look at a few types of lending options available:

Small Business Term Loans

A small business term loan is a lump-sum loan with fixed payment amounts, including principal and interest. These loans can be short-term (6-18 months) or long-term (24 months+) options.

Term loans are ideal for robust marketing campaigns, business expansions, additional inventory purchases, and building up savings accounts. These loans have stricter approval requirements but can provide higher amounts of capital than other lending options.

Business Line of Credit

An unsecured business line of credit is an account with a pre-established credit limit that allows business owners to draw capital as needed. It shares many characteristics with business credit cards and offers revolving funds, which are valuable for redrawing without needing to reapply. 

Business lines of credit are an excellent tool to bridge gaps in cash flow and pay for unexpected expenses. The revolving nature can make it easy to become dependent, making business LOCs more challenging to manage.  

Invoice Financing

Businesses that produce invoices with 30, 60, or 90-day+ turnaround times can be without needed cash while waiting on payment. With invoice financing, accounts receivable financing, or invoice factoring, these businesses can get an advance on those unpaid invoices without all that unnecessary waiting. 

A lender providing invoice financing will front up to 90% of the invoice’s value in exchange for direct payment, plus fees and interest, from the customer or client. It’s an excellent way for businesses to pay employees, reinvest, or buy material while waiting on invoices. 

Some SBA Loans

Landing an unsecured Small Business Administration (SBA) loan is like finding a golden goose, but it is possible. A business must have almost no debt, profitable balance sheets, high creditworthiness, and years in operation before qualifying. 

However, if you do manage to qualify for an SBA 7a loan, SBG Funding can help make the process easy. Plus, with long repayment terms, low interest rates, and substantial lending amounts, the SBA loan is your ticket to leveling up your organization. 

Merchant Cash Advance

A merchant cash advance is an alternative to other funding methods in that it’s an upfront lump-sum payment in exchange for future credit and debit card sales. Also, unlike other repayment methods, lenders collect payment directly from a business’s point-of-sale, preventing missed payments. 

Merchant cash advances are ideal for cash flow shortfalls, enabling business owners to stake future sales to get cash when needed most. This type of financing can be particularly valuable for managing unexpected expenses or capitalizing on timely business opportunities.

Eligibility Requirements for No Collateral Business Loans

What it means to qualify for a no-collateral business loan depends on who you ask and the lender you work with. They also change depending on the type of loan or type of financing you’re trying to get, as higher-risk options, like merchant cash advances, have less strict requirements but come with steep rates. 

Traditional lenders, like banks and credit unions, will have more stringent criteria than online lenders, such as SBG Funding. In general, the minimum requirements for a no-collateral loan through SBG Funding are:

  • A business with at least six months in operations
  • A 600+ FICO score
  • $350,000 in annual revenue
  • Four recent business bank account statements

As your business profile strengthens over time, including increased time in operation and rising annual revenue, your ability to secure more favorable rates and terms also improves. The overall financial health of your business, coupled with the personal credit score of the business owner, significantly enhances your prospects for better lending conditions, such as lower interest rates, higher loan amounts, and minimal fees.

Tips for Managing No Collateral Business Loans

Although no collateral loans are free from asset seizure, they can still be risky for businesses. Improper management can lead to default, damage to good credit scores, legal action, or a disastrous combination of all of the above. 

Like with other loans, following a few essential tips can make a world of difference, such as:

  • Don’t borrow unless you have to.
  • If you have to borrow, only borrow what you need.
  • Make monthly payments on time. 
  • Avoid opening multiple loan accounts or lines of credit. 
  • Have the best financial posture possible before applying.
  • Align loan usage with business goals prior to applying.
  • Include loan repayment in business budgets.

SBG Funding also provides an online portal so that you can access your account 24/7. From a dedicated dashboard, you can view prior payments, outstanding balances, and renewal eligibility or speak with a Relationship Manager.  

Discover Tailored Business Financing with SBG Funding

Small business financing is possible for many businesses, and with the sheer number of financing options available, you can find a solution that suits your unique needs. No-collateral business loans are available everywhere, from term loans and lines of credit to invoice financing and merchant cash advances. 

While it’s easy to find business lenders willing to provide no collateral business loans, few can match the rapid approval, low rates, and customer satisfaction of SBG Funding. Start the application process, or check out our funding calculator to see what your funding options are today! 

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