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Top Advantages of An Unsecured Small Business Loan

unsecured small business loans

Running a business requires money. Plain and simple. But sometimes liquid cash can come up a little short to cover certain business expenses, such as buying inventory, purchasing equipment, covering payroll, and expanding the business.

In these cases, a loan may be warranted. If you have little or no collateral to offer when considering applying for a loan, you might want to consider an unsecured small business loan.

Essentially, an unsecured small business loan is money borrowed from a lender without any collateral to secure the repayment.

Top 4 Benefits of Unsecured Small Business Loans

There are plenty of advantages to applying for an unsecured small business loan:

  • No collateral is required
  • No risk of losing property if you default
  • Interest rates are very competitive and clearly disclosed
  • Borrowers with poor credit are still eligible for approval

What Are Your Small Business Loan Options?

Rather than heading off to the bank to apply for a traditional loan, you’ve got other options. For many small business owners, it makes more sense to seek out alternatives to the bank when it comes to getting the financing needed to start and grow a business.

This is especially true for small business owners who have little to no collateral, haven’t been in business very long, or have a poor credit history.

Here are some alternative unsecured small business loan options you have available to you:

Unsecured Short Term Loan

Just about every small business can qualify for a short-term loan, as long as they are OK with the higher rates and daily payment structure. The interest rate paid and the amount you’re allowed to borrow will depend on your business revenues, your business history, and your credit score.

An unsecured small business loan works like a traditional term loan in that you are given a certain amount of money upfront in exchange for paying it back with an interest rate tacked on to the repayment amount.

With short-term loans, the loan amounts are usually smaller, and the repayment period is much shorter. Usually, the repayment amounts are made on a daily (rather than monthly) basis.

Unsecured Business Line of Credit

A line of credit can be the perfect solution for businesses who may need money in urgent situations where there’s simply no time available to wait for a loan approval. While many alternative loan options typically get approved within a couple of days and money is deposited shortly thereafter, having some cash available on the back burner can be a real life-saver when push comes to shove.

With a line of credit, you are given a set amount of money that you can withdraw any time you need to. You can borrow as little or as much as you require, as long as you don’t exceed the limit, and you are only required to pay interest on the portion you withdraw – similar to a credit card.

Business lines of credit can either be secured or unsecured – if you go the unsecured route, no collateral is required, but the interest rate may be higher as the risk for the lender tends to be greater.

Invoice Financing

Many businesses experience gaps between the invoices they issue and the actual payment they receive. In the meantime, expenses need to be covered, but with a lull in cash flow as a result of such payment delays, this can pose a problem.

Invoicing financing can rectify this issue. With this type of loan option, the lender gives 85 percent of the specified loan amount to the borrower to cover expenses and retains the remainder in a reserve account.

It is from this reserve fund that the lender takes his or her fees. Once the invoices are paid, whatever remains in the reserve fund (the remaining 15 percent minus the lender’s fees) is given to the borrower.

This type of loan requires no collateral, as the invoices themselves collateralize the loan.

Equipment Financing

Every small business requires a certain amount of equipment to operate successfully. A bakery will need ovens, a retail shop will need registers, and a landscaping business will need mowers. Whatever equipment is needed, money is needed to make the purchase.

Equipment financing can help you buy the equipment you need without having to interrupt your business’s cash flow. With this type of financing, you’re given a certain amount of money to pay for your equipment, then you pay the lender back with his or her associated rates – usually between 8 and 30 percent.

Since the equipment serves as collateral, you’re not obligated to come up with collateral on your own.

Credibly – Helping Small Businesses Find the Working Capital Solutions They Need

Every small business owner deserves a fighting chance at success. And while it may be extremely challenging to come up with large sums of money to get started from the ground up and take off, there are funding solutions available to help, many of which require no collateral.

If you’re a small business looking for funding solutions, contact Credibly.com today to find out how we can help!