Business loans without security

Published minimums, checked

Reading an unsecured offer properly

1. Find the personal guarantee clause first. It is in almost every unsecured facility in this market, and it is the thing that makes the lending work.
2. Check whether there is a general lien over business assets. A facility with no named collateral can still take a floating charge over everything you own.
3. Compare the total cost against a secured alternative you could actually get. Equipment finance and factoring both cost less because they are secured on something.
4. Confirm the published minimums before applying. Unsecured floors in this record run from five hundred to six hundred and twenty-five with a median of six hundred.

A personal guarantee is not the absence of security

In an unsecured facility with a personal guarantee, the lender has no claim on a specific business asset and a direct claim on you. For a sole owner of a small business the practical difference between that and pledging the business assets is small, and in one respect it is worse, because a guarantee can reach assets the business never owned. It is not a reason to refuse the facility; it is a reason to read the guarantee, to know whether it is limited in amount or unlimited, and to know whether it survives the sale of the business. Very few borrowers ask those three questions and all three have answers in the document.

What the published bars look like without collateral

Unsecured lending is where the published minimums bite hardest, because the credit file is a larger share of the decision. In this record the unsecured floors run five hundred, five hundred, six hundred, six hundred and twenty-five, six hundred and twenty-five and six hundred and twenty-five, with a median of six hundred, and the revenue floors alongside them start at a hundred thousand dollars a year. Compare that with the equipment pages of the same lenders, where the same institution will publish a lower score against a lower revenue figure, and the price of not offering collateral becomes visible in a way it usually is not.

When unsecured is the right answer anyway

Unsecured borrowing is the right product when the need is genuinely short, when there is no asset to pledge, or when pledging the asset would block something you need to do with it. Funding a gap between a large order and its payment, covering a tax bill, or bridging six weeks of a seasonal trough are all reasonable uses. Funding a long-lived asset with a short unsecured facility is not, and neither is using one to cover a shortfall that is structural rather than timing. The test is whether you can name the event that repays it.

Common questions

Do unsecured business loans require a personal guarantee?

Almost always in this market. The guarantee is what makes an unsecured facility lendable, and a lender offering unsecured borrowing with no guarantee at all is either pricing very high or lending against something else you have not noticed. Read the clause and check whether the guarantee is capped.

Are unsecured business loans more expensive?

Yes, and the same lenders show it in their own published criteria: several publish a lower credit score and revenue bar on their equipment pages than on their unsecured loan pages, which is the risk difference made visible. Expect shorter terms and more frequent repayments too.

Can I borrow without security and without a guarantee?

Rarely, and where it exists it is usually because the lender is secured on something else, such as your receivables in a factoring facility or the equipment in a lease. Those are worth looking at before concluding that no facility exists without a guarantee.

By borrowing product

• merchant cash advance: what the lenders who offer it actually require
• equipment financing: what the lenders who offer it actually require
• invoice factoring: what the lenders who offer it actually require