If your company lacks assets that could be used as collateral, securing a no-collateral business loan may be your biggest concern. Fortunately, there are plenty of unsecured business loans available that don’t need collateral for you to qualify.
Keep reading to learn more about your options, as well as how you can apply.
What is a No-Collateral Loan?
In order to understand what a no-collateral (or unsecured) loan is, we must first explain the term ‘collateral’.
Collateral is an asset used to secure a loan. In other words, anything that can be sold if you’re unable to successfully repay your debt.
Some of the most common types of collateral are:
- Property
- Vehicles
- Equipment
- Savings
- The value of your company
As you might expect, applicants take significant risks by pledging something as precious as their home as collateral. This is why many business owners are looking for the flexibility that an unsecured, or no-collateral, loan provides.
Because the loan is unsecured, it isn’t backed by a specific asset, such as your home or car. Despite this, you must still fulfill revenue and operational requirements to qualify for an unsecured business loan.
The Best Unsecured Business Loan Options
Below, we’ve included five of the most popular ways you can get an online business loan without having to provide collateral.
Learn about each of these options to determine which unsecured loan type may be best for your needs.
1. Merchant Cash Advances
A merchant cash advance allows businesses to receive their required amount as a lump sum. You must then repay the amount borrowed with a percentage of your business’s future credit card sales.
Because of this, businesses that frequently accept credit card payments are more suited to this type of finance. This includes:
- Restaurants
- Retail stores
- Salons
- Tourism companies
Businesses facing seasonal fluctuations may also find a merchant cash advance helpful for maintaining working capital during slow seasons.
2. Unsecured Term Loan
When it comes to unsecured term loans, online lenders typically provide more flexibility and financial options than large banks and credit unions. In fact, many of the benefits and characteristics of a secured loan may be matched by an unsecured term loan from an online lender.
At Zinch, for example, we offer an unsecured term loan to help your business get the cash you need, and quickly. The number of payments and amounts are established from the on-set, allowing you to budget and plan ahead. Our terms range from 3-12 months, but our team will help you determine the right length of time for your needs.
3. Business Line of Credit
A business line of credit is traditionally secured, however unsecured versions of this finance are also available.
So, how do business lines of credit work? A business line of credit lets you borrow a certain amount of money each year. You pay only for the credit you’ve used, allowing you to manage cash flow shortfalls or cover unexpected expenses until you have the finances.
Unlike a term loan, you won’t have a regular monthly payment plan, but there will normally be a minimum monthly payment required. Because interest and late fees can quickly accumulate, however, this sort of financing should not be used for long-term investments or large purchases.
4. Invoice Financing
Invoice financing allows small business owners to use money owed to them as a loan asset, helping them to quickly receive payment for outstanding invoices.
Although invoice financing is classified as a secure loan, you won’t have to worry about losing a physical asset, as you’ll be leveraging your outstanding invoices as collateral for the loan. The overall loan amount is determined by the amount owing to your company and the creditworthiness of your consumers.
5. Equipment Financing
Equipment finance, like invoice financing, requires collateral, but this time it’s in the form of existing equipment or the equipment you intend to buy.
It’s a form of business loan specifically created for the purchasing of business equipment. It allows you to buy and use the equipment immediately while repaying the loan over time.
The price of the equipment determines the loan amount and terms, and once you’ve completed all of your repayments, the equipment is yours to keep.
Is it Possible to Get Unsecured Business Loans with Bad Credit?
Securing a loan when your company lacks a solid financial track record is difficult, but not impossible.
While banking institutions are notoriously difficult to gain approval from if your credit score isn’t high, an unsecured loan from an online lender is an excellent alternative to consider. This is because they accommodate a broader range of customers than the average business loan.
Apply for an Online Business Loan with No Collateral
Zinch offers unsecured business loans in the form of a merchant cash advance or term loan. We’re a direct lender for online loans and provide a fast application process, as well as outcomes within just 24 hours.
Contact us at (714) 500-6622 to learn more about your unsecured business loan options with Zinch. You could qualify for up to $250,000 in just 24 hours.
