Startup Business Loan Options With No Collateral (2024)

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

Starting a business can seem like a bit of a catch-22 situation. Often lenders won’t give you a business loan unless you can offer collateral—an asset that it can repossess if you default. However, with high startup costs, entrepreneurs typically need financing to get off the ground.

This is when business loans that require no collateral come in handy. While it’s easier to get one as an established business, it’s not impossible. If you spend a bit of extra time to make and execute a plan, you’ll likely be able to get the funding you need.

Featured Partner Offers

2

National Funding

Loan amounts

$10,000 to $500,000

APR

Buy rates start at 1.11%

Minimum credit score

600

2

National Funding

Startup Business Loan Options With No Collateral (3)

Startup Business Loan Options With No Collateral (4)

Learn More

On National Funding's Website

3

American Express Business Blueprint™

Loan amounts

$2,000 to $250,000

Monthly fees

Varies by loan term

Minimum credit score

All businesses are unique and are subject to approval and review. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.

of at least 660 FICO at the time of application

3

American Express Business Blueprint™

Startup Business Loan Options With No Collateral (5)

Startup Business Loan Options With No Collateral (6)

Learn More

Via American Express's Website

What Are Business Loans With No Collateral?

Convincing a lender to give you money for a business venture is difficult. Most of the time, they want to see a demonstrated history of success with strong and consistent income. You’re a riskier applicant without that.

Lenders sometimes require collateral to reduce the risk of a loan transaction. This means that if you default, they can seize the collateral—whether it’s a bank account, business inventory, real estate, etc.—to recoup their losses.

But with an unsecured business loan, you can get financing that requires no collateral. But keep in mind that because no business assets back the loan, lenders typically have more stringent qualification requirements and will impose a personal guarantee.

How Do Business Loans With No Collateral Work?

Business loans with no collateral help companies make large purchases and cover the cost of doing business. Funds are generally disbursed as a lump sum that can be used to make a specific purchase or manage cash flow and is then repaid with interest. However, there are other types of small business loans—like lines of credit, merchant cash advances and invoice financing—that can be used to access cash more quickly and on an as-needed basis.

Personal Guarantee Requirement

If you’re applying for a business loan with no collateral, you’ll generally be expected to sign a personal guarantee for the loan. This isn’t quite the same as pledging property for a secured loan, but if you default, the lender can come after your personal assets to cover what you owe.

Startup Business Loan Options With No Collateral

If you’re starting a new business from scratch, you’ll probably need a chunk of money. Here are some of your options for business loans with no collateral:

SBA Loans Under $25,000

If you only need a small amount of startup funds and aren’t in a rush, a U.S. Small Business Administration (SBA) loan for under $25,000 may be a viable option.

These kinds of loans generally offer the most business-friendly terms, with lower rates compared to other loan options. That’s because a portion is guaranteed by the SBA, so if you default, the lender may be able to recoup some of their losses directly from the government.

SBA loans come in all shapes and sizes. For large loans, collateral is usually required. But if you’re applying for a standard SBA 7(a) business loan, you likely won’t have to provide collateral for loan amounts under $25,000. You and any other owners with at least a 20% stake in the business will be required to personally guarantee the loan, however. This means you legally agree to repay what you borrowed with personal assets if the business fails to do so.

Online Startup Loans

Traditional finance institutions may not be so kind to business startups, but that doesn’t mean other lenders aren’t. It’s relatively easy to find loans geared specifically at new startups, often from smaller online lenders. Like other forms of alternative small business financing, online startup loans tend to be on the expensive side, so you’ll need to consider this carefully in your business plan.

Merchant Cash Advances

When you take out a merchant cash advance (MCA), you’ll get paid a lump sum upfront, just like with a loan.

However, rather than paying it back in steady payments over time with interest, you’ll agree to a factor rate that sets the total amount you pay for the loan in advance. You then repay it as a percentage of your credit card transactions—this is known as a holdback percentage. These payments are generally made much more frequently—sometimes even on a daily basis—than with a typical loan, and you’ll continue making them until your advance amount is fully repaid.

For example, if you borrow $10,000 with a factor rate of 1.25, you’ll pay the lender back a grand total of $12,500 ($10,000 x 1.25). If you agree to a holdback percentage of 10%, you’ll pay your lender 10% of all of your daily sales until you’ve repaid the full amount (the $10,000 you borrowed, plus the $2,500 finance charge).

Because your payment amount scales according to your sales, it’s a particularly good option for businesses with seasonal fluctuations in income or new startups that can’t commit to a certain monthly payment amount. However, since there’s no defined term length, you can’t easily calculate an equivalent annual percentage rate (APR) and compare it with other lending options. Typically, though, they’re more expensive than standard business loans.

Alternatives to Business Loans With No Collateral

Many businesses need multiple sources of financial support to get off the ground. You may have to cobble together several types of startup funding. Here are a few other ideas:

Equipment Financing

Equipment financing is similar to how auto financing works. When you take out a car loan, it’s secured by the car you’re buying, meaning you don’t need to have collateral in hand before you get the loan. Similarly, many small business lenders offer secured loans in the form of equipment financing, with the equipment you’re buying acting as the collateral for the loan.

While this type of loan won’t necessarily solve your needs for a storefront, business inventory or workforce, it can be a good option if you need equipment to get off the ground.

Crowdfunding

If you have a strong social network, another option to consider is crowdsourcing to raise the funds you need to start your business. This obviously won’t work for everyone; you wouldn’t expect to start a new biomedical company by setting up a fundraiser on Kickstarter, for example. But if your business is relatively small, it could be a good choice.

Personal Savings

Many people also use their own personal savings to help start their businesses. It can be tempting to raid your emergency and/or retirement savings because these are probably the largest buckets available to you; however, think long and hard before you do. Make sure you have a plan in place for what to do if you lose that money.

It’s also a good idea to work with an experienced small business accountant who can help advise you on the most tax-efficient business setup and how to write off your personal investments into the business.

Find the Best Small Business Loans of 2024

Learn More

Startup Business Loan Options With No Collateral (2024)
Top Articles
Am I Doing No Contact Correctly?
How to use definite and indefinite articles in French?
Craigslist Home Health Care Jobs
Knoxville Tennessee White Pages
AllHere, praised for creating LAUSD’s $6M AI chatbot, files for bankruptcy
Identifont Upload
Jonathon Kinchen Net Worth
The Potter Enterprise from Coudersport, Pennsylvania
Strange World Showtimes Near Amc Braintree 10
Progressbook Brunswick
Buying risk?
Bad Moms 123Movies
Mani Pedi Walk Ins Near Me
The Largest Banks - ​​How to Transfer Money With Only Card Number and CVV (2024)
Blackwolf Run Pro Shop
Second Chance Maryland Lottery
Boston Gang Map
Rondom Ajax: ME grijpt in tijdens protest Ajax-fans bij hoofdbureau politie
Vanessawest.tripod.com Bundy
Recap: Noah Syndergaard earns his first L.A. win as Dodgers sweep Cardinals
Ahn Waterworks Urgent Care
Sussyclassroom
Craigslist Panama City Beach Fl Pets
Fiona Shaw on Ireland: ‘It is one of the most successful countries in the world. It wasn’t when I left it’
Jesus Revolution Showtimes Near Regal Stonecrest
Kabob-House-Spokane Photos
Bleacher Report Philadelphia Flyers
Dal Tadka Recipe - Punjabi Dhaba Style
Arlington Museum of Art to show shining, shimmering, splendid costumes from Disney Archives
Cona Physical Therapy
WPoS's Content - Page 34
*!Good Night (2024) 𝙵ull𝙼ovie Downl𝚘ad Fr𝚎e 1080𝚙, 720𝚙, 480𝚙 H𝙳 HI𝙽DI Dub𝚋ed Fil𝙼yz𝚒lla Isaidub
Till The End Of The Moon Ep 13 Eng Sub
Gus Floribama Shore Drugs
Ridge Culver Wegmans Pharmacy
"Pure Onyx" by xxoom from Patreon | Kemono
Emily Katherine Correro
Goodwill Houston Select Stores Photos
Indiana Wesleyan Transcripts
3302577704
Unifi Vlan Only Network
Craigslist Farm And Garden Reading Pa
R: Getting Help with R
Academic Calendar / Academics / Home
Studentvue Calexico
Go Nutrients Intestinal Edge Reviews
Chubbs Canton Il
Joblink Maine
Hello – Cornerstone Chapel
Sc Pick 3 Past 30 Days Midday
About us | DELTA Fiber
Overstock Comenity Login
Latest Posts
Article information

Author: Prof. Nancy Dach

Last Updated:

Views: 5806

Rating: 4.7 / 5 (57 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Prof. Nancy Dach

Birthday: 1993-08-23

Address: 569 Waelchi Ports, South Blainebury, LA 11589

Phone: +9958996486049

Job: Sales Manager

Hobby: Web surfing, Scuba diving, Mountaineering, Writing, Sailing, Dance, Blacksmithing

Introduction: My name is Prof. Nancy Dach, I am a lively, joyous, courageous, lovely, tender, charming, open person who loves writing and wants to share my knowledge and understanding with you.