Traditional lenders, like banks, typically require small business owners to pledge personal collateral, such as real estate, as security for a business loan. In this article, we’ll review the best unsecured business loans for borrowers who either can’t (or don’t want to) pledge personal collateral in order to get a business loan.
Best Unsecured Business Loan Provider: Kabbage
Our recommended unsecured business loan provider is Kabbage. They’re an online loan provider that doesn’t require you to secure the loan with personal collateral, like your home. If you have a credit score of 550+, business revenues of $50K or more, and at least 1 year in business, then you may qualify. Kabbage fund up to $150K in as fast as 1 day.
Best Unsecured Business Loans 2017:
| Loan Amount | ||||
|---|---|---|---|---|
Kabbage
OnDeck
BlueVine
Fundbox
Credibly
Rapid Advance*Updated: October, 2017
3 Types of Unsecured Business Loans
There are 3 types of unsecured business loans for small businesses. Each type has a specific purpose for when you’d typically want to use it. The three types are:
- Short-Term Business Loans
- Receivables Financing
- Merchant Cash Advances (MCA)
#1 Short Term Business Loans
Short term business loans have quicker funding time and higher APRs than traditional business loans. Typically, you can get a short-term loan within 2-3 days, but the loan will often have an APR around 40%. This may not mean it is necessarily a more expensive option than other loan choices, though, because these loans are designed to be paid back quickly. If you repay these loans within a few months the total cost of capital may be lower than a traditional, longer-term loan.
Short Term Business Loan: Kabbage
Our recommended short term loan provider for unsecured business loans is Kabbage. They can fund you up to $150K within 1-3 days. Expected APR ranges from 30-50% which is inline with alternative lenders. You may qualify if you have at least a 550 credit score, have been in business for 12+ months, and have annual revenues of $50K or more.
Kabbage works like a line of credit. There is no cost or obligation to draw funds if you qualify, and you pay only for the funds you actually use. Also, you repay your Kabbage loan monthly, compared to many other short term loans that require daily or weekly payments.
Short Term Business Loan: OnDeck
Our second recommended short-term business loan provider is OnDeck. They offer loans between $5K – $500K with repayment terms between 3-36 months. The average APR for an OnDeck loan is around 40%, though rates go as low as 9.99%. You may qualify if your business has been around for 12+ months, you have annual revenues of at least $100K, and your personal credit score is 500+. OnDeck loans have daily or weekly repayment schedules.
#2 Receivables Financing
Receivables financing is often called invoice factoring or accounts receivable financing. It’s a funding option that helps businesses receive lump sum payments now in exchange for the value of invoices that are due in the future (typically within 90 days). It is a good option for businesses that invoice customers and are looking to overcome short term cash flow gaps. These lenders use your invoices as collateral instead of other personal or business assets.
Receivable Financing: BlueVine
For businesses processed a large volume of invoices, BlueVine is our recommended receivables financing company. Their financing works like a line of credit, and you can finance between $5K and $2 Million. Once you’re approved for your maximum credit amount, you can receive financing for your invoices up to that dollar amount. When an invoice is paid off by your customer, then it frees up more of your line to finance new invoices with.
BlueVine will advance you between 85-90% of the value of your invoice, and charge you between 2.5-5% per month during the repayment period. You don’t, however, have to make any payments on the amount you’ve borrowed. Once your customer pays off the invoice then BlueVine will subtract their fees and give you anything that’s leftover. Bluevine doesn’t require payments with their receivables product, as long as your invoice is in repayment.
Receivables Financing: Fundbox
Fundbox is our recommended accounts receivable financing provider for smaller invoice financing amounts. They can finance between $1K and $150K, with rates of 0.5-0.7% per week during repayment.
Fundbox, unlike BlueVine, requires weekly payments on the amount you borrow, but they will fund you 100% of the invoice amount. The loan can be repaid in either 12 or 24 weekly payments.
#3 Merchant Cash Advance (MCA)
A merchant cash advance (MCA) helps businesses get lump sums of financing in exchange for a fixed share of their daily credit card and debit card receivables. MCAs are expensive, with APRs ranging from about 30-130%. One benefit of an MCA is that your payment each day is based off of what you make. So you won’t be stuck with a fixed monthly or weekly payment regardless of how much revenue you bring in.
Merchant Cash Advance: Credibly
Credibly offers a merchant cash advance product with up to $250K of funding in as quick as 2 days. To qualify you must have revenues of $10K per month and have 6+ months of business history. Once funded, your repayment period will depend on how much revenue you bring in through your credit card transactions. Credibly has a typical payback period between 4-17 months. Credibly requires daily fixed payments, which may be the most difficult of any option on this list to meet.
Merchant Cash Advance: RapidAdvance
Your credit card sales volume is RapidAdvance’s largest concern when deciding whether or not you can be approved. You can borrow up to $500K within 3-5 days if you have a 500+ credit score, 3+ months of business history, and bring in a minimum of $2,500 in monthly credit card or debit card sales. Their repayment term is completely dependant on your credit card sales volume, but typically ranges between 4-18 months. You make daily payments that equal a percentage of your daily credit card receipts.
Alternatives to Unsecured Business Loans
There are a few alternatives to unsecured business loans for business owners that don’t have collateral, or don’t want to use collateral to secure their loan. Each of these options will require you to be personally responsible for the repayment of the loan through a personal guarantee. These alternatives include:
Small Business Credit Cards
The most overlooked form of unsecured financing is small business credit cards, which are also typically the most unsecured type of financing you can get. These credit cards typically carry lower credit lines than any other form of financing discussed in this article, and you can expect an APR in the 15-25% range. Our recommended business credit card is the Chase Ink card.
Peer to Peer Business Loans
A peer to peer business loan is given by lenders who use a combination of traditional funding sources and individuals to fund a single loan. They are often given through online loan providers like StreetShares, Lending Club, or Bond Street. These loans are typically a middle ground in both term and cost between short term loans and traditional loans, like the SBA loan above.
What Is an Unsecured Business Loan?
Business lenders will generally ask for some combination of three different layers of collateral. A lender may ask you to provide multiple layers of collateral to secure your loan, which is often the case with a traditional bank or SBA loan. Unsecured loans typically have the lightest amount of collateral required and will not require specific collateral up front.
Almost every small business lender will require the borrower to personally guarantee a business loan. This means your personal assets are at risk, but only indirectly.
The three layers of collateral are:
Personal Assets (Like Your Home or Car)
Putting up personal assets, like your home, is what many small business owners are referring to when they ask about collateral requirements. None of the lenders covered in this article require you to collateralize their loans with personal assets, which is why they’re considered unsecured business loans.
Blanket UCC Liens on Business Assets
A blanket UCC lien accompanies most business financing. This is a notice that your lender has an interest in all of your business assets until you repay the loan. If the business fails to make payments, then the business assets, like real estate or equipment, can be sold to make those payments. All of the companies in this article may file a blanket UCC lien on your business assets.
Personal Guarantee
A personal guarantee is commonplace with most forms of financing. While this does not pledge specific assets as collateral, your personal assets could be at risk if you sign a personal guarantee and default on the loan. Every lender in this article will likely ask you to sign a personal guarantee. Personal guarantees are required on the vast majority of small business financing.
Regardless of the level of collateral you think you’re providing for your loan, it’s important to review all of your loan documents before you sign.
Unsecured Business Loans: In-Depth Overview
You should now have a good idea of what type of unsecured business loan you need for your business. Below we provide a table of in-depth information on each of our recommended unsecured business loan providers to give an in-depth overview of each.
Kabbage Unsecured Business Loan
| Minimum Qualifications | $50K+ in annual revenue 550+ Credit score (check your score for free) |
| Amount I Can Borrow | |
| Repayment Schedule | |
| Time to Funding | |
Who’s it Right For?
An unsecured business loan from Kabbage is right for the business that needs funds quickly, and plans on paying it back quickly. Kabbage is the fastest financing option that offers monthly payments during the length of your term. If you have short term cash flow requirements, and only need up to $150K, then this is likely the best option for you. You can read more by checking out our in-depth review of Kabbage.
OnDeck Unsecured Business Loan
| Minimum Qualifications | $100K+ in revenue 500+ Credit score (check your score for free) |
| Amount I Can Borrow | |
| Repayment Schedule | |
| Time to Funding | |
Who’s it Right For?
OnDeck is a great option if you need up to $500K of quick financing. OnDeck is less focused on credit score and more focused on your business’s revenues when deciding whether or not you get approved. OnDeck has excellent customer service and is very competitive with Kabbage. Learn more by reading our in-depth OnDeck review.
BlueVine Unsecured Business Loan
| Minimum Qualifications | Invoice B2B or B2G customers Customers are creditworthy |
| Loan Size | |
| Repayment Schedule | |
| Time to Funding | |
Who’s it Right For?
BlueVine is a great option for businesses with unpaid customer invoices. If you have short term cash flow problems, and find it difficult to make weekly or monthly payments then BlueVine is a good option. This is because you don’t have to make a single payment until your customer pays off the invoice. Learn more by reading our review of BlueVine.
Fundbox Unsecured Business Loan
| Minimum Qualifications | Invoice customers regularly Customers are creditworthy |
| Loan Size | |
| Repayment Schedule | |
| Time to Funding | |
Who’s it Right For?
Fundbox is a great option for businesses with unpaid invoices looking for a line of credit, who also need to be paid quickly. Fundbox requires weekly payments, regardless of whether or not your customer pays off the invoice on time. You can learn more by reading our Fundbox review.
Credibly Unsecured Business Loan
| Minimum Qualifications | $10K+ per month in revenues |
| Loan Size | |
| Repayment Schedule | |
| Time to Funding | |
Who’s it Right For?
Credibly is a good option for businesses who do a lot of credit card receivables and are looking to get quick funding. You must be prepared to make daily fixed payments until the loan is paid off.
RapidAdvance Unsecured Business Loan
| Minimum Qualifications | $2.5k/month in credit card sales 500+ Credit score (check your score for free) |
| Loan Size | |
| Repayment Schedule | |
| Time to Funding | |
Who’s it Right For?
RapidAdvance is a good fit for you if you do a lot of credit or debit card sales and need your payments to be flexible. Because RapidAdvance takes a percentage of your daily credit card receipts as payment, you don’t have to worry about making a fixed payment during the length of the loan. The better you do, the quicker your repay the loan. The slower business is, the slower you repay. You can learn more by reading our RapidAdvance review.
Bottom Line
An unsecured business loan typically means you don’t have to pledge any physical assets directly to secure the loan. Many unsecured loans will still typically file a blanket UCC lien against your business assets and require a personal guarantee.
Our recommended unsecured business loan provider is Kabbage. They offer loans up to $150K if you have 6+ months in business, a 550+ credit score, and at least $100K in annual revenue. They have a quick online application where they can qualify you in minutes, and you can be funded in as quick as 1 business day.
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