Banks usually require collateral as security for a business loan plus a personal guarantee. In this guide, we recommend the best unsecured business lenders for borrowers who don’t want to pledge business collateral or personally guarantee a loan. We also recommend the best unsecured business loans for small business owners who are okay with personally guaranteeing a loan but can’t come up with adequate collateral.
Unsecured Business Loans With No Personal Guarantee
The following 4 lenders issue unsecured business loans that require neither collateral nor a personal guarantee. This means the lender accepts the risk of default. As a result, these options carry high-interest rates.
- Fundbox – Invoice financing
- Behalf – Purchase financing
- PayPal Working Capital – Merchant cash advance for PayPal merchants
- RapidAdvance – Merchant cash advance for all merchants
Unsecured Business Lenders: In-Depth Overview
1. Recommended for Businesses that Invoice Customers: Fundbox
Fundbox Quick Summary
Invoice financing or factoring allows businesses to receive a lump sum payment now in exchange for invoices that are due in the future. It can help stabilize your business’ cash flow.
Fundbox is our recommended invoice financing company. Fundbox advances you 100% of your invoice and requires you to pay back the advance over 3 months. Unlike most invoice factors, they don’t contact your clients. Their APR of 38% to 54% is not too bad for a completely unsecured business loan, and you can get money the very next day after you apply. No collateral or personal guarantee are required.
To learn more about how invoice financing works, review our guide.
2. Recommended for Small Purchase Financing: Behalf
Behalf Quick Summary
Purchase financing (not to be confused with purchase order financing) lets businesses buy essential goods and services when they’re short on cash.
Behalf is our recommended unsecured option for purchase financing. They lend up to $50K, and funding is super quick. You must pay back a Behalf loan in 1-6 months.
Since Behalf pays your vendors for you, you can buy goods and services without broaching the subject of installment plans with your supplier. The APR is around 33%, slightly less than what Fundbox charges and a great deal for a fully unsecured business loan.
Behalf does conduct a credit check, though they emphasize other factors when evaluating businesses. If credit score is a major concern for you, look at our Bad Credit Business Loans guide.
See Our Full Behalf Review
3. Recommended for PayPal Merchants: PayPal Working Capital
PayPal Working Capital Quick Summary
PayPal provides loans up to $85,000 for PayPal merchants. It’s a convenient, quick, and relatively inexpensive way for PayPal businesses to get money. This is also a very flexible loan option because you can choose the percentage of your daily PayPal sales that go towards repayment. The downside is that you can typically only borrow a small amount, 4-15% of your business’ annual PayPal sales.
We also discuss PayPal Working Capital and other quick and convenient loan options in our Fast Business Loans guide.
See Our Full PayPal Working Capital Review
4. Recommended for Businesses With Lots of Credit Card Sales: RapidAdvance
RapidAdvance Quick Summary
Merchant cash advances are probably one of the most popular kinds of unsecured business loans, but also the most expensive. Businesses get a lump sum payment in exchange for a share of daily credit and debit card sales. Some business like the flexibility of a cash advance because it has no fixed term, and you only have to make payments on days that you have sales. However, because of the cost, we don’t recommend going this route unless you’ve struck out with all other options. The APR can be in the triple digits depending on your credit score and volume of credit card sales.
If you must go with a merchant cash advance, our recommended provider is RapidAdvance. Although they’re expensive, they have good customer service and are transparent with customers about pricing and terms.
For Square merchants, Square Capital is a small merchant cash advance that is surprisingly quite affordable.
PARTIALLY UNSECURED BUSINESS LOANS
If you don’t mind providing security for a loan but are struggling to come up with sufficient collateral, consider a partially unsecured loan. You must personally guarantee the loan, so your personal assets will be on the line if you default. In addition, the lender may put a general lien on whatever business assets you do own. However, you can still get the loan even if you do not have collateral for the full amount of the loan. Partially unsecured loans are less risky for lenders than completely unsecured loans, so the cost and other terms are more favorable for borrowers. Below are 3 of the best options for partially unsecured business loans.
1. Recommended for Startups and Bad Credit: Accion
Accion Quick Summary
Non-profit Accion specializes in lending to underserved businesses that banks won’t lend to, so it doesn’t require collateral. That being said, Accion says that providing collateral can strengthen an application and help you qualify for the lowest interest rates. The collateral you provide need not be equal to the amount of the loan–even a small amount of collateral can signify your commitment to the lender.
Accion’s interest rates aren’t as good as Lending Club’s or SmartBiz’s (described below), but Accion will lend to startups and applicants with poor or limited credit history. It’s virtually impossible for a startup or applicant with bad credit to get an unsecured business loan at reasonable interest rates, but it’s possible with Accion.
2. Recommended for Businesses Needing Large Loans: Lending Club
Lending Club Quick Summary
Lending Club is a Peer2Peer platform that connects investors with loan seekers. It’s attractive if you have a unique business model because you can bypass the bank and “speak” directly to individual investors. You have to have good credit and a pretty well established business to qualify for a P2P loan.
Lending Club business loans are unsecured up to $100,000. Other than a merchant cash advance, which is very expensive, this is probably the highest amount you can borrow without having to lay down some collateral.
See Our Full Lending Club Review
3. Recommended for Small Loans With Good Credit: SmartBiz
SmartBiz Quick Summary
SmartBiz makes it fast and easy to get an SBA loan. An SBA loan is backed by the U.S. Small Business Administration (SBA), so it has some of the lowest interest rates on the market for a business loan. It’s the least expensive of all loan options in this article. Ordinarily, it takes weeks to qualify for an SBA loan. SmartBiz has streamlined the process, removing the collateral requirement for loans under $150K and speeding up the funding process to 7 days.
Even for loans above $150K, you only need to provide collateral if your credit score is less than 675. SmartBiz does place on your business assets for loans over $25K.
See Our Full SmartBiz Review
Although secured, traditional bank loans still make up the largest share of small business loans, many businesses are turning to unsecured alternatives. Completely unsecured business loans (without any collateral requirements and no UCC filings) exist, but partially unsecured options are more affordable. If you don’t feel comfortable with the idea of pledging your personal and business assets or are struggling to come up with enough collateral, we encourage you to learn more about the 7 options described above.