Applying for a large business loan often comes with the need for collateral – it serves as a form of protection for lenders, ensuring that you are not going to default on the loan. In case you fail to repay it, the lender can seize the collateral to recover the losses.
Collateral can take many forms, including real estate, vehicles, inventory, or equipment. However, the reality is that many businesses don’t have enough – or any – collateral to back up the loan that they are looking to apply for.
In addition, a lot of businesses simply don’t want to risk losing their valuable assets in case of a default, especially if they rely heavily on them for their day-to-day operations (such as in the case of equipment or machinery).
This is where large unsecured business loans come into play – they allow you to avoid asset devaluation, preserve borrowing capacity, and give you the flexibility you need to take your business to the next level.
Let’s take a look at some of the most important things you need to know when it comes to large unsecured business loans:
What is a Large Unsecured Business Loan?
A large unsecured business loan is a loan of a substantial amount – such as $5 million, $15 million, or $25 million – that a lender grants to a business without the need for collateral. In other words, the loan doesn’t have to be secured by a physical asset in the case of defaulting.
Instead, these loans are typically based on the creditworthiness, performance, and financial health of the borrower. Cash flow often becomes the primary determinant of eligibility. They offer quick access to capital for growth, inventory, or operational expenses but often come with higher interest rates due to the increased risk for lenders.
5 Advantages of Large Unsecured Business Loans
So, why would you apply for a large unsecured business loan instead of a secured one? Let’s take a look at some of the advantages of this financing option:
1. No Collateral Required
Having to provide collateral typically means pledging assets such as real estate, inventory, or equipment. However, this also means a risk of losing these assets if you fail to repay the loan, which reduces the risk for lenders but increases it for you as a borrower.
Not having to provide collateral is a huge advantage for large unsecured business loans, especially if you don’t have valuable assets or you don’t want to risk losing them.
2. Faster Approval
Another advantage of large unsecured business loans is that they are typically associated with a faster approval process. Unlike secured loans, which require a thorough evaluation of the collateral that you are offering, unsecured ones are faster because of:
- Simplified Documentation – There is no need to provide the paperwork that lenders require for collateral, which is usually needed for assessing the value, condition, and ownership of the assets.
- Credit-Based Evaluation – Lenders rely on credit score, financial statements and business performance to make their approval decision; all of which can be quickly verified through reports and documents.
- Automated Systems – While traditional banks usually have a slow and complex application process, non-bank lenders use fast and efficient online systems to speed up the application process while maintaining security.
- Reduced Bureaucracy – Traditional lending institutions often have more bureaucratic layers, especially for secured loans, involving multiple checks and approvals from different departments. Unsecured loans, particularly from online lenders, often bypass these layers.
3. Simplified Application Process
The exact application process for large unsecured business loans will depend on the financial institution – for example, NBC offers a streamlined process that is fast and simple. With National Business Capital, you can:
- Apply Securely Within Minutes – Move through the process within minutes, and upload your documents without any risk.
- Review Your Offers – As a diverse Finance Group, NBC gives you access to dozens of exclusive offers to help you find the right fit for your needs.
- Receive Your Funds – Leverage the opportunity to take your business to the next level and respond to new challenges with confidence.
Compare your offers with expert advice from our team and select the best one for your specific circumstances.
4. Less Risk to Assets
Another key advantage of large unsecured business loans is that they pose less risk to your essential physical assets. Since you don’t have to pledge any of them, you won’t be able to lose them in the case of defaulting.
This is especially important if you rely heavily on them for day-to-day operations – for example, a truck that you are using for logistics and transportation, or a crane that you are using in your construction business.
5. Preserved Borrowing Capacity
Large unsecured business loans come with another advantage for your business – preserved borrowing capacity. Since your assets are not encumbered by liens, you can keep them for future secured loans in case you need larger funding.
This is particularly important if you need to access large amounts of capital quickly for purposes such as expansion, unexpected opportunities, or emergencies.
What Are the Different Types of Large Unsecured Loans?
If you are looking for a large unsecured business loan, there are a few options that you can choose from.
Business Term Loans
Business term loans are among the most preferred options when it comes to securing a large unsecured loan – the exact funding amount may vary by financial institution. With National Business Capital, you can secure anywhere from $100,000 to $10 million.
You can choose between:
- Short-term Loans – With repayment periods between 6 and 18 months
- Intermediate-term Loans – To be repaid between 1 and 3 years
- Long-term Loans – With a repayment period between 5 and 25 years
It’s also important to consider the financial institution that you are planning to secure your large unsecured business loan with.
Traditional banks or credit unions may take 30-90 days for the whole process, while non-bank lenders can move you from application to funding within 24 hours.
Business Line of Credit
Business line of credit is another option that you have at your disposal if you are looking for large unsecured business loans. This financing tool can be either secured or unsecured, where you need to keep in mind the following differences:
- Secured Lines of Credit – You will have to provide collateral as a guarantee against defaulting. It’s typically associated with higher credit limits and lower interest rates, but the lender can seize the collateral if you default on payments.
- Unsecured Lines of Credit – This option doesn’t require collateral, which means that there is no risk to your valuable physical assets. However, it’s associated with higher interest rates and lower credit limits.
A business line of credit is especially useful if you are looking for more flexibility with your business loan – it allows you to draw funds on an as-needed basis without having to reapply every time. You only pay interest on the amount drawn.
Revenue-Based Financing
Revenue-based financing allows you to secure capital by leveraging your business’s future sales, which makes it a good option if you are looking for large unsecured business loans. Just like a business line of credit, it can yield amounts such as $2 million and $5 million.
Lenders will typically offer you funding amounts ranging from 1 to 3 times your monthly revenue – for example, if your monthly revenue is $100k, you might be able to qualify for financing between $100k and $300k.
However, different financial institutions may have different maximum limits, so make sure to check with your lender of choice before applying.
Qualifying For a Large Unsecured Business Loan With NBC
If you want to secure a large unsecured business loan, look no further than National Business Capital. With $2+ billion financed since 2007, multiple awards, and an experienced team of Business Finance Advisors, we have everything you need to find the best financing options for your project.
Are you ready to get started? Apply here.
Frequently Asked Questions
The maximum amount you can borrow with a large unsecured business loan typically ranges from $50,000 to $10 million, though some lenders may offer higher amounts for more qualified borrowers.
The exact limit depends on factors such as your business’s financial health, creditworthiness, annual revenue, and the lender’s specific criteria. Higher loan amounts are generally available to established businesses with strong financials and solid credit histories.
Interest rates for unsecured business loans generally range from 6% to 30%, depending on factors such as the borrower’s creditworthiness, financial health, and the lender’s policies.
Businesses with strong credit scores and solid financials can secure rates at the lower end, while those with higher risk profiles may face higher rates. Rates can be either fixed, providing consistent payments, or variable, which can fluctuate with market conditions.
The application and approval process for unsecured business loans can vary widely, typically ranging from a few days to several weeks. Online lenders often provide faster processing, with approvals in as little as 24 to 72 hours and funding shortly thereafter.
Traditional banks and credit unions may take longer, often requiring 1 to 3 weeks for thorough review and documentation verification. The exact timeline depends on the lender and the complexity of the loan application.
To qualify for a large unsecured business loan, a credit score of at least 680 is typically required, though some lenders may consider scores as low as 600. Higher credit scores, often 700 or above, significantly increase the chances of approval and access to better terms and interest rates.
Lenders also consider the business’s financial health, revenue, and overall risk profile in their decision-making process.
Applying for an unsecured business loan generally requires documentation including personal and business credit reports, financial statements (profit and loss, balance sheets), tax returns for the past 1-3 years, a detailed business plan, bank statements, and legal documents such as business licenses and incorporation papers.
Some lenders may also request accounts receivable and payable aging reports to assess cash flow stability.
If you default on a large unsecured business loan, the lender can pursue several actions. They may impose late fees, increase the interest rate, or take legal action to recover the debt. The default will negatively impact your business and personal credit scores, making future borrowing more difficult.
Additionally, personal guarantees may allow lenders to go after your personal assets, despite the loan being unsecured.
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