Is it possible to get a small business loan without collateral security?

Often a small business loan application may get stalled for lack of collateral. Secured loans have among the lowest interest rates and longest repayment periods available. However, if collateral is not available, a lender may still fund you if you provide a personal guarantee. This has its own risks and your best bet is to look for a small business loan without personal guarantee.

Do unsecured business loans always need personal guarantees?

To be clear, you can get a small business loan without a personal guarantee. However, the interest rate is likely to be higher or you may be approved for a lower loan amount based on your credit score and business history. If you don’t have steady cash flow or are just starting up,the bank will likely insist on a personal guarantee to reduce risk.

A business loan with personal guarantee isapproved on the basis of personal assets like a home or investments. Alternatively, you can ask a third-party to act as guarantor. In this situation, the lender will recover the outstanding amount from the third party in case of non-repayment.

Is it possible to get a small business loan without collateral security?

If you have a good credit history and a strong business plan, lenders may agree to fund you without a personal guarantee. However, the interest rate will be considerably higher than a loan against security.  Non-bank lenders are an excellent alternative for small business loans without collateral or personal guarantee. They use flexible credit risk models that assess the overall credit worthiness of the business, including the owner’s personal credit history.

How to get a small business loan without collateral or personal guarantee?

Online loan providers often specialise in small business loans for people with bad or no credit history. Applying online is also much faster- a typical online loan application takes only a few minutes to complete. Depending on the type of loan, you may need to provide additional information such as balance sheet and/or bank statements. However, you will need to have been in business for at least 12 months with revenue of $50,000 or more to be eligible for a small business loan without collateral or personal guarantee.

 

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