How to Get an Unsecured Business Loan in 5 Effective Steps

Financing is critical for starting and maintaining a successful business. At some point or another, you’re going to need business financing to cover an unexpected expense or jump on a new opportunity for growth. Whatever the situation, access to additional capital can be a huge help. As you research different types of loans, you’ve probably come across the terms “secured” and “unsecured” business loans. Simply put, unsecured business loans are financing products that don’t require you to put up collateral. In other words, you won’t have to pledge any of your assets in exchange for financing when you take out an unsecured loan. Unsecured business loans are fairly sought-after. Unfortunately, they can also be difficult to qualify for in some cases. That’s why we’re sharing top insights about unsecured business loans and how to get an unsecured business loan.

How Do Unsecured Small Business Loans Work?

Unsecured small business loans don’t have any collateral requirements. Instead of looking at the value of the assets you own, lenders will heavily weigh your credit score, revenue, and growth potential to qualify your business. Collateral can be risky for small business owners, especially when using personal assets to fund your growth. If your business plans turn sour or you can’t make payments, you may be forced to forfeit the property you’ve used as collateral. Many newer businesses also have limited access to valuable assets, which can cause them to be excluded from financing – unsecured business loans step in to resolve these issues. If approved, you won’t have to worry about your lender seizing your assets if you can’t repay your loan. The downside to unsecured business funding is that they’re typically more expensive than secured financing solutions. This is because unsecured business loans are riskier for lenders. Since they won’t have the option to claim your assets in the event of a default, lenders will impose higher interest rates to compensate for this heightened risk.