Access to capital is a critical component of small business growth, but getting an unsecured loan can be a bit more challenging. Lenders are available to provide the money you need, but finding the right lender and proving your company is a safety risk are two key steps in getting an unsecured small business loan.
What Makes an Unsecured Small Business Loan Harder to Obtain?
Unlike loans on real estate, equipment, or other assets, these loans have no collateral. Lenders must take on more risks to offer these loans. That’s why lenders need to use the business’s income and expenses to determine if it is a good risk to lend to you.
How Can You Obtain a Small Business Loan Without Collateral?
Loan approval is not dependent on collateral or assets for these loans. You don’t have to give a lender access to your business as a result. However, you do need to prove to the lender you can repay your loan. There are several types of unsecured business loans that you may qualify for depending on the situation:
Long-term loans: Some unsecured loans have several years while others extend to a decade or more. These tend to be larger amounts and require repayment over a longer period of time.
Short-term loans: Most without collateral qualify for short-term loans as long as they can prove revenue. These loans are smaller amounts and are typically repaid within a year or less. This can be a bit more expensive due to higher interest rates but works as a good option for unexpected needs.
A business line of credit: This type of loan works much like a credit card. Business owners can access the funds when they need them. They can repay over time. Owners (or businesses) with a good or better credit score may benefit from this type of loan.
Working capital and merchant cash advances are additional types of small business loans without collateral. These loans are repaid, with interest, as consumers make purchases from you or you receive payments from invoices sent.
How to Prove Your Worth to Get a Business Loan
It would help if you showed lenders you can confidently repay the borrowed funds. Take these steps to ensure lenders can see the value in lending to your business:
* Ensure you have proof of revenue. Provide at least six months but up to a year’s worth of revenue reports.
* Make sure your credit report is accurate and as good as it can be.
* Pay other debts on time.
* Apply for a secured loan first. Prove your ability to repay that loan and then apply for a larger unsecured loan.
* Work with the lender to show the value of your company. A business plan may help with this.
Many lenders offer unsecured loans to small businesses that have the means to repay them. If you’re unsure if you qualify, reach out to Key Capital today. Let our extensive experience and network help you to find the financial solutions your business needs for growth, debt consolidation, or revenue-building strategies.