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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.
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
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.