An unsecured business 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.
While more established businesses will likely find better rates and terms with a traditional business lender, startups without collateral should look into alternative lenders that offer unsecured business loans.
Many unsecured loans do require collateral, just not specific collateral. 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 and financially responsible if you don’t pay off your business loan — even if your business fails and has to close.
Types Of Unsecured Business Loans
Short-Term Loan: Loans that you have up to a year (or less) to pay back
Medium-Term Loan: Loans that you have 2-5 years to pay back
Personal Loan: A loan that you can take out even if you have no business qualifications.
Line Of Credit: A credit line you can draw from to pay business expenses as needed.
Merchant Cash Advance: An advance on your business’s future credit card sales.
Equipment Financing: A loan to pay for business equipment
Invoice Financing: An advance on your company’s unpaid invoices.
SBA Microloan: A small SBA loan up to $50,000
Requirements
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
Documentation
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
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