You may need a small business loan for many reasons, from buying inventory and equipment to keeping your business afloat during an unprecedented event like the recent COVID-19 pandemic. However, most lenders require you to provide collateral to qualify your small business loan application. The collateral serves as security in case you default on the loan repayments.
While this can be a hindrance if you‘re short on assets that could act as collateral, you can still obtain a small business loan to fund your goals without any collateral. Reputable online no-collateral lenders like My Canada Payday can offer you the quick cash you need to boost your small business without asking you to provide any security. If you’re planning to get an unsecured small business loan, here are a few options you may want to consider:
1. Online loans
As earlier mentioned, online business loans are designed to make it easier and quicker to apply and get qualified for a small business loan without providing collateral upfront. While online loan lenders don’t require you to provide any physical asset or cash as collateral, they may ask for a personal guarantee of cash flow. This way, you guarantee the lender to take it upon yourself to repay the loan should your business default. Taking out online loans can be a great way to fund your business if you’re not eligible for a bank loan, but you personally have high credit scores and have been running your business for about six months.
2. SBA Loans
Another great way to finance your small business without collateral is using small business administration loans. These loans are typically backed by a government agency, allowing you to borrow an unsecured loan of up to $25,000 to pay business-related expenses, whether starting or expanding your small business.
However, you need to provide a personal guarantee as a business owner. Some unsecured SBA loans usually collateralize the asset you buy with the loan money, so you don’t have to put up any collateral upfront.
3. Merchant Cash Advances
Besides SBA loans, you can get business financing without collateral using a merchant cash advance. This option allows you to borrow a lump sum of cash for your small business for a share of your future revenue. Unlike a standard loan that requires you to pay monthly interest, with merchant cash advances, you repay your loan as a percentage of your weekly or daily sales.
This type of unsecured business loan also requires less documentation than other funding options. That’s because MCA lenders can repay themselves from your daily or weekly earnings. They can also benefit you if you run a seasonal business with fluctuating or low annual revenue because your loan repayments won’t be more than the agreed percentage of sales. If you’re looking for an easy small business loan with bad credit, merchant cash advances can be a great choice.
Endnote
While most lenders require borrowers to provide collateral for loans, the above-discussed financing options allow you to get small business loans without putting up any security. However, you may have to pay a higher interest rate since you pose more risk to the lender. To find the best unsecured small business loan for you, you need to determine how you’ll use the loan money and consider the cost, terms, and borrowing requirements.
