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UNSECURED BUSINESS LOAN
What is an Unsecured Business Loan?
Many businesses don’t have the specific collateral required to qualify for a bank loan. Fortunately, some lenders do not require that their loans be secured with particular collateral and lenders that need a general lien vs. specific collateral.
An unsecured business loan is simply a loan from a lender that does not require any form of collateral from a business or a business owner. The decision is based solely upon the creditworthiness of the applicant. Other than financing through credit cards, it is rare that a loan is entirely unsecured.
Many small business owners are interested in a loan or line of credit for their business. However, they don’t have the specific collateral a bank may require, such as real estate, inventory, or other hard assets.
Do Banks Underwrite Unsecured Business Loans?
Banks don’t generally underwrite business loans without the security of some form of specific collateral. Banks prefer to write loans based on particular assets' value and take liens on those particular assets. In this way, the bank can significantly reduce its lending risk. Often, this disqualifies businesses without assets valued highly by a bank or have hard assets to value or sell—but would otherwise be an excellent potential business borrower.
Does HealthCare Affairs Require Specific Collateral to Secure its Loans?
As a business loan broker, we shop with wholesale lenders and partners who make loan approvals to businesses based on business fundamentals like cash flow, credit history, and other metrics that demonstrate a healthy business, not based on any business asset's value. In addition to the business credit profile, the owner’s credit score, time in business, and cash flow, Lenders consider other factors when evaluating any business’s creditworthiness. This makes it possible for a healthy business to secure a business loan, even if they don’t have specific assets that could be used as collateral.
If you have a healthy business, but you’re not sure about the value of a specific asset or whether or not you have adequate collateral, consider applying for a small business loan with us. You could decide for your business, sometimes as quickly as within an hour.
Compare Loan Requirements:
Bank Loans: are underwritten by requiring specific collateral: a lien on assets + a personal guarantee.
Equipment Financing: Equipment as collateral + a personal guarantee
Our Term Loan: Doesn’t require specific assets for collateral—a general lien on business assets is required + a personal guarantee.
BUSINESS LINE OF CREDIT
Every small business needs to adapt to change, especially in times of growth or uneven cash flow. When your business needs ready access to cash and flexible terms for repaying borrowed funds, an unsecured line of credit can often be an ideal solution.
A small business line of credit is typically offered as unsecured debt, which means you don't need to put up collateral. Many unsecured credit lines come with a variable interest rate and are available for sums ranging from $6,000 to $100,000.
The primary reason to open a business line of credit is to gain access to short-term funding. Most businesses use these funds to support financing for operational expenses like supplies and payroll or increasing inventory. Cyclical businesses often rely on an unsecured line of credit as a source of off-season working capital.
SHORT-TERM BUSINESS LOAN
Short-term business loans are a type of term loan. They have a set repayment term and offer a one-time, lump-sum payout to the borrower upfront. The borrower must repay the sum of the funds borrowed plus interest and any fees over this term.
The repayment term is what defines a term loan as short. Short-term loans typically have a repayment period ranging from a few months to a few years. A small business owner usually takes out a short-term loan when they have an immediate need that does not require a large capital investment.
Typical uses of short-term business loans are:
Building up business credit
A business term loan is a lump sum of capital that you pay back with regular repayments at a fixed interest rate. This type of traditional financing is what most people think of when it comes to small business loans.
The “term” in “term loan” comes from its set repayment term length, ranging from a few months to several years depending on the type of loan. Therefore, although term loans can vary in size, the phrase “business term loan” is most often used to refer to loans with terms of one to five years.
Generally, business owners use the proceeds of term loans to finance specific, one-off investments for their small businesses, such as real estate purchases, business expansions, debt refinancing, and more.
Long-term loans are those with terms longer than five years. Some of the most outstanding long-term loans are SBA loans (with terms of up to 25 years.) Long-term loans require top borrower qualifications and are slow to fund but also offer the lowest interest rates. These term loans are issued by traditional lenders like banks and credit unions.
ASSET BASED BUSINESS LOAN
Asset-based lending, frequently called “ABL,” is a type of loan secured by various collateral types. Most commonly used by businesses, asset-based loans are typically secured by accounts receivable, inventory, equipment, or real estate. Whereas banks typically approve loans based on a proven record of predictable cash flow, asset-based lender’s approach to underwriting is more reliant on the collateral coverage for repayment. This often allows ABL lenders the ability to approve an asset-based loan where a bank would not.
MERCHANT CASH ADVANCE (MCA)
A merchant cash advance (MCA) isn’t a loan but rather a cash advance based upon the future credit card sales deposited in a business’ merchant account. A business owner can apply for an MCA and have funds deposited into a business checking account reasonably quickly—sometimes as soon as 24 hours after approval.
MCA providers evaluate risk and weight credit criteria differently than a banker or other lenders. They look at daily credit card receipts to determine if a business can pay back the advance on time.
Many small business owners find a short-term loan to be an alternative. With a strong credit profile, others can leverage a business line of credit to meet short-term needs for additional cash flow. Depending upon the loan's nature, periodic payments will be either daily or weekly, allowing the small business owner to spread the debt service burden throughout the month, rather than requiring one more considerable amount at the end of the month.
The Small Business Administration (SBA) works with lenders to provide loans to small businesses. The agency doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by partnering lenders, community development organizations, and micro-lending institutions. The SBA reduces the risk for lenders and makes it easier for them to access capital. That makes it easier for small businesses to obtain financing. SBA offers many different types of loans based on the nature of the business. Speak with one of your licensed loan officers to see if your business qualifies for an SBA Loan.
EQUIPMENT FINANCING & LEASING
Equipment financing lets you finance up to 100% of the cost of new or used equipment for your business, such as ovens for a restaurant, machinery, or company cars. From heavy equipment like forklifts to sizeable medical equipment, having the equipment you need is a necessary part of your business. Don’t be deterred by the considerable cost of equipment. With equipment financing and leasing, you can get up to $150,000 in funding for financing your new or used business equipment. We offer the Lowest Payment Guarantee and no down payment options; we cost you less. Our dedicated Loan Specialists will work to get you quick approval on virtually any type of equipment. They will then find the payment option that's best for you.
BUSINESS START-UP LOAN
Small business startup loans are designed to give young companies working capital. Start-up loans for new businesses can range anywhere from $500 to $750,000. SBA 7(a) loan program funds up to $5 million. Loan terms can vary from one year up to five years. You should know that while you are paying back this loan, it might be more challenging for your business to secure another funding source.
BUSINESS ACQUISITION LOAN
If you’re looking for a loan to buy a business, Business Acquisition Loans are tailor-made for you. A business acquisition loan helps to purchase an existing business or franchise rather than going the startup route. Business acquisition loan amounts range from $5,000 up to $5,000,000.
COMMERCIAL REAL ESTATE FINANCING
Conventional commercial real estate loans are like residential mortgage loans.
They offer the most extended terms of any type of commercial real estate financing, typically a 5 to 10-year repayment schedule, and comparatively low-interest rates, typically in the range of 4.7-6.75%.
Underwriting for these loans may take months, as lenders will generally order an appraisal of the property and want to see complete borrower and property financials.
Among other things, requirements may include a personal FICO score of 700 or more and at least one year of business financial data. This most traditional commercial real estate financing is most frequently used by investors looking to buy an existing, occupied asset with positive cash flow. SBA 7(a) and SBA 504 loans are popular options as well.
COMMERCIAL VEHICLE FINANCING
Commercial auto loans are used by businesses to buy vehicles needed for work-related operations. That includes getting products to customers, completing jobs, and transporting employees, among others. This type of loan is offered by banks, credit unions, finance companies, and alternative lenders. It’s similar to a consumer auto loan, except that far more documentation is required. These loans are available for new and old vehicles as well as for refinancing existing loans.
Because vehicles are considered depreciating assets and expensive to buy, many businesses choose to lease instead. But purchasing could be a good option if your company needs the vehicle long term and wants to write off its tax returns depreciation.
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