If you’re a small-business owner, you may have looked into a small-business loan as a source of financing. Small-business loans typically are used to start or expand a business, purchase inventory and supplies, or strengthen a business’s solvency. 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 can be business or personal and include real estate, equipment, savings, an auto title or other assets.
The median small business has less than a month’s worth of cash available to pay expenses if there were to be a gap in the company’s cash flow, according to a 2016 JP Morgan Chase & Co. Institute study. Many small businesses don’t have collateral to pledge for a loan, or owners would have to put personal assets on the line, such as a home.
Unsecured loans from alternative lenders may be a good choice for small businesses that don’t have collateral or well-established credit ratings.
“An unsecured loan can provide essential financing for a business that is facing a crisis or an opportunity,” says Gerri Detweiler, education director for Nav, which offers free personal and business credit scores and a small-business financing marketplace.
Small-business loans can be difficult to obtain without collateral, but options do exist. This guide will help you explore those options and find the best loan to start or grow your small business.
You’ll learn about the different types of unsecured financing for small businesses, how to apply for an unsecured small business loan, and how to choose the best unsecured business loan for your company’s needs.