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Unsecured Business Loans

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Unsecured Business Loans

For Small Business Owners, Unsecured Business Loans Can Be a Vital Source of Financing

When considering the benefits and risks of financing, Unsecured Business Loans may be an option. Small Business Grants and Loans will help you navigate every step of the way.

If you are a small business owner, you may have considered a loan as a source of financing. Typically, small business loans are used to start or expand a business, purchase inventory and supplies, or improve cash flow. In fact, 40% of small businesses applied for funding in 2017, according to the most recent Federal Reserve Small Business Credit Survey.

However, many lenders require small business owners to offer some form of collateral for a business loan. Collateral may be based on business or personal assets and could include real estate, equipment, savings, an auto title, or other assets. Small Business Grants and Loans represents your best interests and navigates the process.

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Unsecured business loans

How Do Unsecured Business Loans Work?

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Loans, Lines of Credit, Invoice Factoring, Unsecured Business Funds, Working Capital,Traditional Term Loans,SBA Loans

Small business lenders typically require some form of collateral before approving a loan. Collateral is an asset the borrower offers as security for the repayment of the loan. If the borrower defaults on the payments, the lender can claim the collateral.

If your business has valuable assets, such as inventory, furniture, real estate, vehicles, even intellectual property like computer code; you might be able to use them as collateral for the loan. But if you do not have any business assets, lenders may approve a loan with the expectation that you offer personal assets as collateral, such as your family home or a vehicle.

Not every borrower is able to put up collateral for a small business loan. The good news is that Small Business Grants and Loans works lenders who not only make small business loans to those who would usually be denied by traditional banks but also to offer unsecured loans that require no collateral.

We help business owners acquire Line of Credit, Invoice Factoring, Merchant Cash Advance Working Capital and Traditional Term Loans, SBA Loans.

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Advantages of Unsecured Business Loans

Disadvantages of Unsecured Business Loans

Easy to Obtain

Unsecured business loans are easier to obtain than secured business loans because your business does not need to supply collateral (which can be time consuming). Instead, we work with lenders on your behalf to negotiate the best rates as well as the best terms to make sure you are getting the best deal.

 

Because of our reputation and relationships with financial institutions, lenders will typically offer a faster, simpler process. We at Small Business Grants and Loans will work on your behalf to expedite the funding process.

Faster Approval Turnaround

Unsecured business loans usually have faster approval times. Online applications are not nearly as lengthy as a typical loan application. Some lenders approve unsecured business loan applications in as little as 24 hours.

 

Our process is streamlined and different in the fact that we work the banks and lending institutions to reduce their “Preferred Lender Winning Rate.” We maximize the best terms for our clients.

 

Other forms of financing, such as a secured business loan or SBA-guaranteed loan, can take a month or longer to be approved.

Higher Loan Amounts

Small businesses may be approved for a higher loan amount with an unsecured loan than a secured one. Because there are no collateral requirements limiting the value of the loan, the amounts can potentially be higher.

 

Typically, with secured loans, you cannot borrow more than the value of your collateral. In fact, lenders normally extend up to a certain percentage of how much your collateral is worth. This value of your loan against the value of the personal or business property you are providing as collateral is called the loan-to-value ratio.

Fewer Restrictions on use of Funds

Unsecured business loans typically do not have many restrictions, aside from not using the financing for illegal activities, gambling or buying securities.

Lenders Can’t Take Your Business Property

While a lender can seize collateral if your business defaults on a secured loan, a lender cannot take your business or personal property, if you default on an unsecured business loan without a court order.

Unsecured Loans may be Discharged in Bankruptcy

If your business files for bankruptcy, the court may discharge unsecured loans. Secured loans are typically not discharged.

Personal Guarantees Are Required

With an unsecured business loan, the borrower typically signs a personal guarantee. You do not need to provide a specific asset when you apply for the loan. Instead, if you sell or dissolve your business, you are personally liable for the loan which you must repay, if you have a personal guarantee. A lender has a greater ability to pursue any assets you personally own – now or in the future.

Higher Interest Rates

Unsecured business loans are riskier for lenders, so interest rates on unsecured business loans are often higher than on secured business loans. Your business will likely pay more over the life of an unsecured loan than on a secured loan of the same amount.

Shorter Repayment Terms

Unsecured business loan repayment terms are usually shorter than those of secured business loans, which means the borrower will need to be prepared to pay off the loan quickly. As well, the lender may require higher payments, but that is where we negotiate the right terms that work for our clients.

Qualification Requirements

Unsecured business loans can be harder to qualify for. If your business has a poor or nonexistent credit history, the lender may not approve your application. You may be required to provide both personal and business credit histories.

 

Conversely, some lenders do not weigh credit as heavily and look primarily at the business’s revenue. For example, a business with strong credit card sales, or sales via PayPal or Amazon; they may be able to get an advance on those funds, and the decision will largely be based on the revenue stream.

 

While there are drawbacks to unsecured business loans, particularly that they can be more expensive than traditional business loans, unsecured business loans can be the right fit for the right business, and we work with you to get the best loan and terms to fit your needs.

What Are the Types of Unsecured Small Business Financing?

Unsecured small-business loans work just like traditional small-business loans, except that you are not required to offer a form of collateral. Alternative lenders are usually a better option than turning to credit card debt, and they can offer more favorable rates and less red tape than a commercial lender.

“The application process is usually easy, fast and does not impact your credit score,”

“Typically, the loans are unsecured and can accommodate small startup expenditures and working capital.”

Types of unsecured small-business loans typically offered by alternative lenders include:

Term Loans

Term loans provide small businesses with a lump sum of capital. Businesses agree to pay back the term loan over a set amount of time with an agreed-upon payment schedule. Each payment includes the principal amount, plus the interest owed on the loan for that period.

While these loans are typically easy to secure, term loans with short repayment periods can be challenging for a small business or a startup because of the need to make larger payments.

Business Line of Credit

With a business line of credit, a lender approves you for a revolving line of credit. It works like credit cards; there is a maximum limit you can borrow, and you will be charged interest only for the amount of money you borrow.

You can rely on your line of credit for business-related expenses, such as purchasing inventory, investing in marketing, filling in cash flow gaps or growing your business. Let us say you have a $10,000 business line of credit, and you spend $5,000. You will still have $5,000 available, and once you pay $5,000 back to your lender, you will be back to the original amount.

Looking for Unsecured Business Loans?

Unsecured small-business loans work just like traditional small-business loans, except that you are not required to offer a form of collateral.

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