How to Access Small Business Loan Without Collateral

Starting and expanding a small business requires heavy financial assistance. Most entrepreneurs often rely on business loans to finance their startups. While secured loans have better repayment terms and interest rates, they need collateral or an asset as security. This means that small businesses looking for financing rely on their assets, like motorcycle value, as security.

On the other hand, you don’t need collateral to access unsecured business loans. Here, lenders assess the borrower’s creditworthiness to determine loan terms. Below are the steps for acquiring a business loan without collateral.

Small Business Loan

1. Know your Options

You should begin by identifying lenders offering small business loans without requiring collaterals. Fortunately, most lenders offer these types of loans, albeit at different terms and with varying approval requirements. They include:

  • Online loans: Applying for business loans from online lenders is easy and faster. However, you should be wary of their interest rates. Online loans are a good option for business owners who can’t meet the requirements for traditional bank loans.
  • SBA loans: Borrowers don’t need collateral to access SBA loans of $50,000 or less. However, these loans require a personal guarantee from business owners with more than 20% equity.
  • Bank loans: You can also access unsecured loans from some traditional lenders through term loans or business lines of credit. Applying for business loans from banks is time-consuming.
  • Alternative options: Invoice financing, equipment financing, and inventory financing also don’t require collateral.

You should also consider peer-to-peer lending to fund your small business. Most peer-to-peer lending platforms connect small business owners who need funding to potential investors.

2. Determine Whether you Qualify for the Loan

Review your business’s financial statements to determine whether you are eligible for small business loans from various lenders. Some no-collateral loans for small business financing have more stringent requirements than others. For instance, your business should have been operational for at least two years to qualify for SBA loans. You should also meet the revenues and credit scores set by specific lenders.

Requirements for online lenders are somehow fluid. For instance, low credit scores aren’t an obstacle to invoice or merchant financing. However, your business should have more than six months of operating history.

3. Prepare to be a Personal Guarantor or UCC Lien

While you can access small business loans without collateral, you should be prepared to sign a personal guarantee or UCC lien. This basically means you agree to take personal responsibility in case your business fails to repay the debt. Since lenders don’t ask for collateral, this guarantee allows them to sue you and collect unpaid debt from your personal property.

A UCC (Uniform Commercial Code) lien is slightly different. This lien allows the lender to attach your business assets in case you default on the loan. Even if you didn’t place any collateral for the loan, the lender can recover unpaid debts from your business assets.


Accessing a small business loan with a poor credit score or proof of stable revenue isn’t easy. However, you can access small business loans without the hurdles of a good personal credit score or collateral. Ensure that you critique all the loan options above before applying. Understand the interest rates, repayment period and terms, and other conditions in the loan agreement.