When applying for small business financing, personal collateral usually comes with the territory. Lenders look for some type of possession to back the loan in case of default, like your property, car, home, etc. But risking your own assets can be worrisome, especially when you’re investing in a new venture.
For business owners seeking financing without risking collateral, unsecured loans can be a good option. Similar to credit cards, this funding method consists of multiple lines of revolving credit that can be used for anything from working capital to franchise fees to home renovations (there are no use of proceeds requirements). What’s more, you only acquire interest on the portion of funds you use.
Since banks don’t need to verify collateral, the application process for an unsecured loan is quick and simple. Most deals close within three weeks or less, and offer up to $150,000 in small business financing. These funds can also be used in combination with other forms of financing, such as SBA loans or 401(k) rollovers, allowing you to reach your funding goals.
Unsecured loans rely on a borrower’s credit report to judge eligibility. As such, business owners with high credit scores (690+) are most likely to be approved for the small business line of credit. Lenders also look for a low credit utilization score (amount of credit you’ve used versus your total credit limit), no derogatory remarks on your credit report, and no more than two credit inquiries in the last six months. Banks may also ask for income verification to ensure your ability to repay the loan.
If you’re interested in an unsecured loan, consider employing the services of a qualified small business financing firm. They’ll help you gather the necessary documentation and can match you with a lender that best meets your needs, taking the guesswork out of the process.