Get a Business Loan with No Collateral and Bad Credit
Updated: Apr 13
Business Loan with No Collateral
You can request our Funding Programs Overview on our website or by sending a text to (442) 222-9429. Our Funding Programs Overview includes several loan and business funding options that do not require collateral.
Yes, it is possible to get a business loan without collateral. This is called an, "Unsecured Loan." Unfortunately, if you do not want to secure the loan with collateral, it does reduce your options and the money is going to be more expensive. As well the term, or the amount of time designated for you to repay the loan amount, will usually be much shorter.
A business loan with no collateral is also known as an unsecured business loan. A secured business loan has collateral that the lender can repossess or take if you, the borrower, fail to pay the loan back or do not make your loan payments as agreed upon in the contract.
Accounts Receivables Financing with a Low Credit Score
To get an unsecured business loan you will need to provide proof of your business' accounts receivables. If the lender or funding company can see that your business has sufficient monthly revenue and consistent accounts receivables, they may approve a loan, even though there would be no collateral.
This is sometimes referred to as: accounts receivable financing. Some business term loans do not require any collateral or security on the loan. There are also merchant loans that do not require collateral either.
You may or may not be familiar with a merchant cash advance, but this type of business funding is actually not by legal definition a loan. Instead, it is called an "advance against the receivables of the business." It may require very high average monthly gross deposits in order to be approved for funding. The contract on this type of funding will specifically state, sometimes several times, that "This is not a Loan."
Secure a Loan with No Personal Guarantee
Yes it is possible to secure a loan or other types of business funding with no personal guarantee. How much collateral is needed for a business loan? Well, if you don't mind paying higher rates and paying back the money more quickly then the answer is, not much collateral is required for a business loan and in some cases, no collateral is needed for a business loan.
If you have a small business, you may not have real estate that you can use for collateral. You lay also not want to take out a loan that requires a personal guarantee. As a small business owner in the United States, you may or may not be able to afford high interest rates, or perhaps you can afford a higher interest rate if you can count that interest as a tax write-off.
Business loans qualify your business to write off an interest expense. For a secured business loan the amount if interest you can write off is less. For a merchant cash advance or for many term loans, you will not need any types of collateral to secure a loan or some business funding, and you can get funded with a low credit score as well.
Can I get a Line of Credit or Business Line of Credit?
Yes, there are both secured and unsecured lines of credit. A line of credit that is unsecured has no form of collateral. However a business line of credit where your collateral is an asset with sufficient value, can help you to secure a much cheaper and larger line of credit. However, it may also require a personal guarantee.
Business owners in the USA have a lot of advantages over non business owners when it comes to your taxes and liability. As well, if your business owns commercial real estate, or other business assets, you may be able to add a depreciation tax deduction. Also, of course, if you have commercial real estate, it can be used as collateral, to help you get lower rates. It is actually the best type of collateral and the best way to secure the loan.
Business loans are an important part of growing your business more quickly. The ability to get a small business loan is very important.
What About SBA Loans?
SBA loans or small business loans that are backed by the government, are very popular but can be difficult to get. They are one of the best types of business financing though. They are also going to want you to have already established good business credit.
Once Again, How Much Collateral is Needed for a Business Loan?
It totally depends on what small business owners can tolerate as far as expense is concerned. Sometimes people ask if they can use inventory as collateral? the answer is that it can ber very tricky to use inventory as collateral.
Secured loans require an asset that can be repossessed. Inventory however, fluctuates. So there may be a lot for the bank to take sometimes and very little to take other times. So they don't make the best assets in the eyes of the lender.
For unsecured loans or unsecured business funding no collateral is needed. There are unsecured lines of credit, and unsecured private lending that require no business collateral.
What About Equipment?
A lender may allow you to use equipment as an asset to help you get lower interest rates or approved for a loan. However it needs to be equipment with enough value and the loan amounts typically require that you have a lot of equity in the equipment. It is higher risk to the lender if other lenders already have a lien on the equipment.
What About Property?
As mentioned, businesses with property as assets are the favorites of online lenders. If you have real estate with sufficient equity, then you have a very good chance of getting a loan as long as the loan to value is there.
Are Unsecured Loans More Expensive?
Yes, unsecured loans are always more expensive because they are more risk to the lender. Some feel that they are so expensive that the should be called, loan the lender, loans. It is defintely far more economical if you have assets as collateral.
What About Personal Assets?
Yes, personal assets can be used as one of the collateral requirements. They are something that you can use to secure a loan, even if they are not owner by the business. SBA will almost always blanket lien all of your assets whether they are business assets or personal. Collateral may be the difference between an SBA approval or an SBA decline for financing. Does the SBA require collateral? Not always.
Financing is always cheaper if there is less risk to the lender and they always prefer to fund if they have property that they can take if the borrower defaults. This reduces their risk and makes them more likely to look favorably on businesses. Once again collateral is an asset.
How do I Get an Unsecured Loan Requiring No Form of Collateral?
The best way is to find a good business loan broker. A good business loan broker that also can get SBA loans approved. SBA loans usually have good interest rates. They don't always require collateral but if you have multiple types of business collateral or a type of collateral that they can easily come and take, you can get secured loans that don't require blanket liens.
Why is Equipment Financing Typically Hard to Get?
Equipment financing you would think would be easier to get because the equipment has value, it is secured by itself, is more secured than inventory, and typically easier to repossess than inventory. This should represent less risk to the bank and make it easier for businesses to get funding.
With the asset as the security, lower interest rates would be expected. Businesses in construction often also have property as an asset and typically even a building as an asset, which can assist in typically giving them the appearance of more stability for financing and thus more value in the eyes of a bank.
What are the Best Types of Collateral Preferred by Lenders?
The best types of collateral, preferred by lenders, for a small business loan or any business loans, for a low interest rate, are property or real estate, with a structure or building on the property.
The Value of the property needs to be 20% to 30% higher than the amount of funding and sometimes lenders may require more than that. Is there a such thing as real estate equipment? Not really. Unless you are referring to heavy equipment.
Can I Get Lenders to Approve a Business Loan with Bad Credit?
It is difficult to get approved for any kind of secured financing or business loans if you have a bad credit score. There are 2 types of credit that you need when applying for financing. There is both business credit and personal credit. You have a personal credit score and a business credit score.
Lenders will take both of these credit scores into consideration when underwriting a secured loan. You would think that getting approved for a secured business loan would be easier but for some weird reason, lenders have made it harder instead. Despite the value of having an asset with value that the lender can take if you default, it is actually easier to get e line of credit or business funding that is unsecured.
We Will Do Our Best to Get You the Best Bad Credit Business Loan at Competitive Rates & Terms
Please visit our home page at www.americapitalsolutions.com to apply for all types of business loans and lines of credit today. Make sure to ask for your Free Funding Programs Overview.
Rodney Wood - email@example.com - Call/Text (442) 222-9429 and request your Free Funding Programs Overview to find out what your business can be approved for.