Can I Get a Business Loan Without Collateral?

Start-up businesses which are not able to, or not willing to, offer up assets to secure any business debt that they are contemplating taking on, generally seek business loans without collateral requirements. These are ideal funding options for new businesses.

Most business loans can only be acquired by giving up a valuable asset such as equipment, a savings account, or a piece of property. Collateral is important to lenders as it safeguards them against the possibility that the borrower is unable to repay the loan. If things go south, the lender can still retrieve the money lent to the borrower by seizing the collateral.

Additionally, very few financial organisations are willing to sign up for the risk of funding start-ups which may or may not succeed. They feel more secure providing loans to companies which have a rich business history under their belts. However, as we mentioned earlier there are some lenders who are willing to fund the aspirations of small business owners despite their inability or reluctance to offer no collateral.

In this article we provide the necessary information which you may need when you are searching for a business start up loan which doesn’t require any collateral.

No Collateral? No Problem!

If you have only recently stumbled upon a good business idea and it has only been a few weeks or months since you have started your business, you may have already realised that starting out in business is not a cheap affair. You may have discovered many start-up costs which you were unaware of when you first made the plans for your business.

When you want to grow your start-up and cover these costs, paying out of your own pocket is not exactly an option for every business owner. By taking a start-up business loan, the small amount of capital which is needed to lift your business off the ground becomes available to you. It may sound like a very good idea until you realise that most finance providers need collateral to give you a loan. But if you do not have any collateral to secure a business loan, the following are some options that you have:

Unsecured Business Lines of Credit

One of the best business financing options that you may find you have at your disposal is a Line of Credit. These facilities offer borrowers revolving and flexible capital whenever they need it.

Collateral will certainly be necessary to secure a loan if you try to access a business line of credit through a traditional lender. But over the past couple of years, many alternative lenders, both online and offline, have started offering unsecured business lines of credit which are unsecured and therefore need no collateral. They are willing to offer revolving and convenient funds in the form of a business line of credit without the need to pledge specific assets to secure the debt.

Merchant Cash Advance

You may have already heard about Merchant Cash Advances if you are looking for start-up business loans which do not require you to pledge collateral. It is one of the quickest and easiest ways to get hold of a business loan without collateral being needed. A Cash Advance Loan – or, Merchant Cash Advance as it is commonly known – is an easy and quick way to get a lump sum of capital that can be used to grow a business.

The cash advance provided to you by the lender can be paid back by allowing them to take a percentage of your business’s daily card sales. Even those businesses which have a moderately poor credit score and no collateral to offer have a chance at acquiring a merchant cash advance to meet their financing needs. Such options can turn out to be a life saver for businesses which have been turned down by traditional finance lenders.

Business Credit Cards

Companies which have only taken baby steps in the world of business and have no collateral to offer could consider a business credit card. This funding option is suitable for businesses which do not have a clear idea about the exact amount of funds that they may need and are looking for an option which gives them the flexibility to borrow as much as they need without any collateral.

If you are not sure about which costs may come your way and do not wish to take on more liability than what you need, a business credit card is the right choice for you.

Additional Options

If you have already explored the options given above and have not been successful in acquiring finance, there are two other options that you can give a try. The two loan products are discussed in this segment are considered to be the most efficient, no-collateral, small business loans on the market.

Equipment Financing

If the purpose of taking out a loan is to buy expensive equipment for your small business, you can consider applying for equipment finance. With an equipment loan, it is possible to finance up to 100 percent of the costs of your new equipment. The money that you borrow from the lender will need to be paid back in the form of monthly installments.

When the entire loan amount has been repaid, you will become the owner of the equipment. The best part about an equipment loan is that the equipment itself acts as collateral and therefore you do not need to offer any other form of collateral.

Invoice Finance

If you are constantly waiting on your customers or clients to pay their invoices for the service you have provided to them, you could consider invoice finance. In this type of finance, the lender will advance you the amount of money which is locked up in unpaid invoices. A certain percentage of your outstanding invoices will be provided to you.

Whilst start-up business loans which do not require collateral are difficult to come by in the traditional finance industry, a growing number of alternative finance providers have started offering financial products – specifically for new businesses –  which do not require collateral.

 

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