Business Loans
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Best Unsecured Business Loans in 2022

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Unsecured business loans help businesses get the funds they need without having to pledge any collateral — an asset that the lender can repossess if you fail to pay your loan. But this doesn’t mean you’re off the hook: Borrowers often have to sign a personal guarantee.

Unsecured business loans may not require collateral, but they often come with higher interest rates and shorter repayment terms. Read on to learn if they’re the right fit for your business.

Best unsecured business loans

We’ve put together a list of some of the best unsecured business loans from online lenders in the table below.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

LenderBest forMaximum loan amountRepayment termStarting APR
OnDeckOverall$250,000Up to 24 months29.90%
BluevineLine of credit$250,0006 to 12 months6.20% for 26 weeks
Fora FinancialStartups$750,000Up to 15 months1.10 to 1.35 factor rate
National FundingBusiness expansion$500,0004 to 24 months1.10 factor rate
Headway CapitalBad or no credit$100,00012, 18 or 24 months40.00% APR

Learn more about how we chose our picks.

OnDeck: Best overall

Term lengthUp to 24 months
Term lengthUp to 24 months
Max. amount$250,000
Starting APR29.90% APR
Min. credit score625
Min. time in business1 year

Pros
  Can receive funds the same day you finalize loan

  Low required minimum credit score


Cons

  Personal guarantee and blanket lien imposed

  Must have business annual gross revenue of at least $100,000

OnDeck is the best overall lender for unsecured business loans. It offers loans from as small as $5,000 up to $250,000, with terms of up to 24 months. In addition, its lenient credit and time in business requirements make this lender a particularly accessible option. However, OnDeck requires a personal guarantee, and the lender also imposes a blanket lien on business assets.


Bluevine: Best for a line of credit

Term length6 to 12 months
Term length6 to 12 months
Max. amount$250,000
Starting interest rate6.20% simple interest for 26 weeks
Min. credit score625
Min. time in business6 months

Pros
  Funds can be received within hours after approval

  Only needs to be in business for at least 6 months


Cons

  $10,000 in monthly revenue

  Cannot be located in Nevada, North Dakota or South Dakota

A line of credit is revolving, flexible funding that can be withdrawn when needed. You only pay interest on the amount borrowed, and can then borrow again after you pay back what is owed. Bluevine is a great option because its lenient eligibility criteria can allow you to access credit lines up to $250,000.


Fora Financial: Best for startups

Fora Financial

Term lengthUp to 15 months
Term lengthUp to 15 months
Max. amount$750,000
Est. interest rate1.10 to 1.35 factor rate
Min. credit score500
Min. time in business6 months

Pros
  Only needs at least ​​$12,000 a month in gross sales

  Can receive funds 72 hours after approval


Cons

  Business cannot have open bankruptcies

  Short repayment terms

Requiring only six months in business, Fora Financial’s business loan could be a good option for startups. Loan amounts can extend up to $750,000 with no restrictions on how to use the funds, but its factor rate can make borrowing expensive. To determine how much you’ll pay with interest, multiply the total loan amount by the factor rate.


National Funding: Best for business expansion

Term length4 to 24 months
Term length4 to 24 months
Max. amount$500,000
Est. interest rate1.10 factor rate
Min. credit score600
Min. time in businessSix months

Pros
  Can receive funds 24 hours after approval, though 72 hours is more common

  Early payoff discounts


Cons

  Website isn’t transparent about eligibility requirements online

  Additional origination fee is charged

If you’re looking for a loan to expand your business, National Funding may be a good fit, as the lender advertises loans for businesses looking to grow. You can receive funds up to $500,000 relatively quickly, up to 72 hours after approval.


Headway Capital: Bad or no credit

Term length12, 18 or 24 months
Term length12, 18 or 24 months
Max. amount$100,000
Starting APR40.00% APR
Min. credit scoreNone
Min. time in business1 year

Pros
  Interest does not compound

  No prepayment penalties


Cons

  High starting APR

  Not available in all states

Having poor credit does not necessarily need to be a barrier for getting funding.  Headway Capital’s line of credit could be a good option for a business loan for bad credit — the lender has no minimum credit score requirement. Borrowers can access up to $100,000 choosing from several term length options.


How unsecured business loans work

Unsecured business loans can provide funding to businesses without requiring collateral. But because you’re not required to pledge any assets, unsecured loans are considered riskier to a lender and, therefore, can come with higher interest rates. Lenders may also ask for either a personal guarantee or blanket lien to ensure repayment on the loan.

Personal guarantee

Instead of asking for collateral, many unsecured loans require a personal guarantee. This clause is usually found in the business loan agreement and states that the business owner is personally responsible for repayment if the business defaults on its loan. Personal guarantees help to mitigate the financial risk a lender takes on with an unsecured loan.

There are two types of personal guarantees. An unlimited guarantee — also known as an unconditional guarantee — requires guarantors to pay until the debt is paid in full, while a limited personal guarantee can require only a percentage of the loan due.

Blanket lien

Unsecured business loans may also place a blanket lien on business assets. This ensures that all business assets become collateral if the loan defaults. With multiple assets to secure the amount of the loan, it’s less risky for lenders — but borrowers will have a lot to lose if they’re not careful.

Secured vs. unsecured loans

Requiring collateral isn’t the only way that secured business loans are different from unsecured loans. Here’s how secured versus unsecured loans compare:

Unsecured loansSecured loans
Loan amountsTypically smaller than secured loan amountsDepend on the value of the collateral
TermsIncreased lender risk often results in shorter payment termsLonger repayment terms based on collateral
RatesNo collateral makes for higher risk to lenders and higher interest ratesThere’s lower risk with collateral, so interest rates are typically lower
ApprovalApplicants may be subject to more scrutiny before being approvedBecause collateral reduces the risk for lenders, applicants may have a better chance of approval
Time to fundingWith no assets to appraise, lenders may issue funds more quicklyIndividual assets must be appraised, slowing down time to funding

Types of unsecured business loans

Since collateral is the defining aspect of whether a loan is secured or not, unsecured loans can come in several types. The different types of business loans are described below:

Term loans

Small business term loans are a type of funding that comes in a lump sum of around $5,000 and $500,000 (or higher) and are paid back in installments over a certain period of time. Long-term business loans are usually repaid in monthly installments, while short-term loans can have daily or weekly payments. Unsecured term loans can come with higher interest rates, as they aren’t backed by collateral like secured term loans (which require property or equipment as assets).

Line of credit

A line of credit is a revolving credit line you can use when needed and pay back only when you borrow the funds. Similar to term loans, a line of credit can also be secured or unsecured. A secured line of credit requires collateral; an unsecured line does not, but can come with a personal guarantee or lien. In addition, a secured line of credit could potentially come with higher loan limits and lower interest rates than an unsecured line of credit.

Other, riskier types of unsecured business financing

Merchant cash advance

Though not technically a loan, a merchant cash advance is an alternative form of business financing where you get a lump sum of money upfront in exchange for part of your future revenue. While a loan may require monthly payments on interest, a merchant cash advance is paid back in what’s called a factor rate. These rates can either be daily or weekly percentages of your business sales. Since this type of funding can be less strict in terms of documentation requirements, it can be a good option for newer businesses looking for a startup business loan with no collateral.

Invoice factoring

Unlike invoice financing, which is a loan secured by the company’s invoices, invoice factoring is when you sell your invoices to obtain additional funding; there’s no collateral required or personal guarantee. After a customer pays their invoice, the third party factor calculates and collects one of two types of fees — a flat fee or a variable fee — and then sends you the remaining balance.

Are equipment loans unsecured loans?

Equipment loans — also called equipment financing — are a form of business loan where the equipment itself secures the loan and can be repossessed if the loan defaults. Because the equipment is the collateral for the loan, equipment loans may be easier to qualify for than other types of secured loans.

Pros and cons of unsecured loans

Now that you understand the many types of unsecured business loans and how they differ from secured loans, it’s important to weigh out the pros and cons of unsecured business loans.

ProsCons
  No collateral is required  A higher credit score is usually needed
  Can receive funds fast  May need a personal guarantee
  Start-up businesses may be able to get approved  Traditional lenders tend to not offer unsecured business loans, so you’ll likely need to consider alternative online lenders

Methodology: How we chose our picks

To appear on our list of best unsecured business loans, we selected lenders offering max loan amounts of at least $100,000, repayment terms of at least 12 months or longer and a minimum time-in-business requirement of six months or longer. We considered credit requirements, time to funding, application eligibility, interest rates and overall loan cost in making our list.

Frequently asked questions

An unsecured business loan is a financing option that doesn’t require collateral. However, even though there are no assets to be seized if your loan defaults, a personal guarantee may be required, or a blanket lien may be placed on the loan to secure repayment. Since unsecured business loans are risky for lenders, they can often come with higher interest rates.

Yes. Unsecured business loans don’t require collateral from borrowers. Instead, lenders may ensure repayment by requiring a personal guarantee or placing a blanket lien on the loan.

You might be able to get a business loan without a personal guarantee if you can provide collateral. Oftentimes, a personal guarantee only covers a portion of what you borrow so offering collateral that covers more (or all) can help. If you need to get a personal guarantee for a loan, you may consider having all business partners sign on so everyone is liable — not just you.

Since unsecured business loans are riskier to lenders than secured loans, they can require higher credit scores to qualify. There are also strict requirements regarding how long you’ve been in business and the type of industry your company falls under. Some lenders also have state requirements and don’t lend to certain areas. You’ll likely need to provide documentation on your business performance, which includes financial statements and most recent tax returns.

You may be able to find some lenders that accept bad credit. However, lenders will usually require a higher credit score when a loan isn’t backed by collateral.

Interest rates on an unsecured business loan are usually higher than those for secured business loans. Since there’s no collateral, unsecured loans are riskier to the lender and therefore, can come with higher interest rates.

If a lender placed a blanket lien on your unsecured business loan, your assets may be at stake. Should you default on your loan, the lender can take your business assets and use them as collateral for repayment. A personal guarantee may have also been required which makes you personally responsible to pay back the loan.

 

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