Unsecured startup business loans can be a great option for startups that might not have a lot of collateral but need quick access to funds. Here is a list of lenders who offer unsecured loans, along with a brief summary and reasons why they might be good partners for your startup business:
The State of Unsecured Startup Loans in 2023 – Some interesting recent trends and numbers:
- Higher demand for funding: As the market sees a higher demand for goods and services, small businesses may struggle to keep up without an injection of extra funding.
- Possible recession: Inflation is at unsustainable levels and reached a high of 8.5% in 2022, the highest it’s been since the early 1980s. The Federal Reserve has continued to raise interest rates, but its goal is to keep rates within 2%. If a recession does occur, it will likely happen sooner rather than later to lower the percentage rates.
- Growth of unsecured business loans market: The unsecured business loans market is expected to grow, but it faces challenges due to the high risk and cost associated with such loans.
- Higher costs of goods and services: The Consumer Bankers Association (CBA) and Small Business Financial Exchange (SBFE) released a report reflecting the impact of a volatile interest rate environment and higher costs of goods and services on small businesses.
- Expected increase in short-term loans: According to Technavio, the unsecured business loans market size is estimated to grow by USD 2895.17 billion from 2023 to 2027 at a CAGR of 10.13%, with the short term loan segment.
- Small business owners planning to sell their businesses: According to Guidant Financial, a small portion of business owners plan to sell their businesses (11.86%) in 2023, possibly due to new opportunities or economic uncertainty.
Overall, while there are some challenges and uncertainties in the market, there are also tons of opportunities for growth and funding for small businesses in 2023.
32 Lenders Who Will Give Unsecured Business Loans for your Startup Company
- Summary: Kabbage offers unsecured lines of credit with a quick, automated approval process.
- Why Good: No collateral is needed, and you can access funds instantly after approval. This is ideal for startups needing quick cash without the lengthy traditional bank approval process.
- Summary: Specializes in short-term unsecured loans and lines of credit.
- Why Good: OnDeck offers fast approval and funding, usually within 24 hours. They’re good for startups looking for quick, unsecured financing options without stringent eligibility criteria.
- Summary: Offers unsecured personal loans that can be used for business purposes.
- Why Good: LendingClub offers competitive interest rates and the ability to repay the loan early without penalties. It’s good for startups looking for flexibility and lower costs.
- Summary: Provides unsecured lines of credit based on your invoices or cash flow.
- Why Good: No collateral is needed, and there’s a quick application and approval process, making it perfect for startups with a robust invoicing process.
- Summary: Offers unsecured lines of credit and invoice factoring.
- Why Good: Particularly useful for B2B startups, as it can convert unpaid invoices into cash quickly without requiring collateral.
- Summary: Offers a variety of unsecured loan options.
- Why Good: Known for quick funding and a simple application process, Credibly is good for startups looking for a variety of unsecured loan options.
- Summary: Provides unsecured business loans and lines of credit, targeting veteran-owned businesses but open to others as well.
- Why Good: StreetShares offers low-interest rates and short repayment terms, making it a good option for startups looking for quick and affordable funding.
- PayPal Working Capital
- Summary: Offers unsecured business loans to businesses that process payments via PayPal.
- Why Good: Approval is based on your PayPal sales history, making it a good option for startups that already have a record of online sales.
- Summary: An online marketplace that connects startups with a variety of lenders offering unsecured loans.
- Why Good: With multiple lenders in one platform, startups have a higher chance of finding a loan that fits their specific needs.
- QuickBooks Capital
- Summary: Offers unsecured short-term loans based on your business’s financial data within QuickBooks.
- Why Good: Ideal for startups that use QuickBooks for accounting and want a seamless loan application and management process.
- Summary: Utilizes AI to evaluate credit risk, considering factors like education and employment history.
- Why Good: A good choice for startup founders with strong academic or professional backgrounds but limited business history.
- Summary: Offers unsecured personal loans that can be used for business purposes.
- Why Good: Avant specializes in serving borrowers with lower credit scores, making it accessible for startups with less-than-stellar credit.
- Summary: Peer-to-peer lending platform offering unsecured personal loans.
- Why Good: Flexible loan amounts and competitive interest rates make Prosper a versatile option for various business needs.
- Summary: An online marketplace connecting businesses with multiple types of lenders, including those offering unsecured loans.
- Why Good: Offers a broad network of lenders, increasing the odds of finding a suitable unsecured loan.
- Celtic Bank
- Summary: Offers a variety of business loan options, including unsecured loans.
- Why Good: Known for personalized customer service and flexible loan terms, making it adaptable to various startup needs.
- National Funding
- Summary: Specializes in equipment financing and unsecured business loans.
- Why Good: Offers a high approval rate and fast funding, generally within 24 hours of approval.
- Reliant Funding
- Summary: Provides quick, short-term unsecured business loans.
- Why Good: Quick approval and funding, often within the same day, make this a good option for startups needing immediate capital.
- Summary: Offers unsecured loans with a focus on short-term lending.
- Why Good: Fast application process and quick access to funds make SnapCap ideal for startups needing immediate liquidity.
- Summary: A PayPal service offering customizable unsecured business loans.
- Why Good: Offers the flexibility to choose your loan amount and terms, making it easier to match the loan with your startup’s specific needs.
- Summary: A non-profit that allows startups to raise unsecured loans through crowdfunding.
- Why Good: Offers zero-interest loans and is great for startups with social impact, as it allows you to tap into a community of mission-driven investors.
- Summary: A platform that helps businesses find the best financing options, including unsecured loans.
- Why Good: Nav uses AI to match your profile with suitable lenders, making the search process easier and more efficient.
- Summary: Facilitates SBA and bank loans, some of which are unsecured.
- Why Good: Ideal for startups looking for larger loan amounts with lower interest rates, thanks to the SBA backing.
- IOU Financial
- Summary: Specializes in unsecured working capital loans.
- Why Good: Fast funding and flexible repayment terms, ideal for startups with fluctuating cash flow.
- Balboa Capital
- Summary: Offers a variety of financial products including unsecured loans.
- Why Good: Known for quick approval and funding, making it useful for startups in urgent need of capital.
- Summary: Offers unsecured business loans along with lines of credit.
- Why Good: Competitive interest rates and favorable terms make it a good long-term financial partner.
- One Park Financial
- Summary: Provides unsecured business loans for small and medium-sized businesses.
- Why Good: Ideal for startups that require immediate funding with less red tape.
- BFS Capital
- Summary: Offers short-term unsecured loans for small businesses.
- Why Good: Quick and straightforward application process; good for startups needing quick access to capital.
- Fora Financial
- Summary: Provides unsecured loans and merchant cash advances.
- Why Good: No restrictions on how the loan can be used, giving startups maximum flexibility.
- Summary: Focuses on providing quick unsecured working capital to businesses.
- Why Good: Simple online application and fast approval make it ideal for startups in need of rapid funding.
- Summary: Offers unsecured business loans and merchant cash advances.
- Why Good: 75% approval rate and quick funding make it accessible and expedient for startups.
- Rapid Finance
- Summary: Provides a range of financing solutions including unsecured business loans.
- Why Good: Offers customized solutions to suit specific startup needs, including high-risk industries.
- Summary: Specializes in merchant cash advances and unsecured working capital loans.
- Why Good: Quick application and approval process with no restrictions on use, offering flexibility for your startup’s various needs.
Remember, while unsecured loans don’t require collateral, they often come with higher interest rates and may require a personal guarantee. As always, make sure to do your own research and consider consulting a financial advisor to find the best fit for your startup’s needs.
20 Step Process on How to Get an Unsecured Startup Loan for your Startup Business:
Obtaining an unsecured startup loan can be challenging, especially for those without a strong credit history or business track record. These loans don’t require collateral but generally come with higher interest rates to mitigate risk for the lender. Here is a step-by-step guide that can help you navigate the process:
Research and Planning
- Evaluate Your Needs: Calculate how much money you need and how you plan to use it. Create a detailed business plan outlining the startup’s business model, market research, and financial projections.
- Check Credit Score: Your personal credit score will often be a significant factor for an unsecured loan. Check your credit score and try to improve it if necessary.
- Identify Lenders: Research potential lenders such as banks, credit unions, and online lenders that offer unsecured startup loans.
Gather Necessary Documentation
- Financial Statements: Prepare all necessary financial statements, like balance sheets, income statements, and cash flow projections.
- Personal Identification: Typically, you’ll need government-issued ID, proof of address, and possibly some other identification.
- Business Plan: This is an essential document that lenders will scrutinize to assess the viability of your startup.
- Personal Financial Statements: These are often required to gauge your personal financial standing.
- Bank Statements: Usually, you’ll need at least six months of personal and/or business bank statements.
- Tax Returns: Both personal and business tax returns from the past two years are usually needed.
Apply for the Loan
- Approach Multiple Lenders: Don’t put all your eggs in one basket. Apply to multiple lenders to increase your chances of getting approved.
- Submit Application: Fill out the application forms and attach all required documents. Each lender will have its process and form.
- Attend Interviews or Meetings: Some lenders may require an in-person meeting or a more thorough discussion about your business.
Loan Approval and Agreement
- Await Response: The lender will review your application and either approve or deny it. This can take anywhere from a few days to several weeks.
- Review Offer: If approved, you will receive a unsecured startup loan offer, which you should review carefully. This will include the loan amount, interest rate, and repayment terms.
- Negotiate Terms: Don’t hesitate to negotiate terms, such as the interest rate or repayment period, if possible.
- Sign Agreement: Once satisfied, sign the unsecured loan agreement. Make sure you read and understand all the terms and conditions.
Receive Funds and Start Repayments
- Receive Funds: The loan amount will be disbursed into your account, often within a few days of signing the agreement.
- Start Business Operations: Use the loan for the intended purpose as outlined in your business plan.
- Repay Loan: Make timely repayments according to your loan schedule to maintain a good credit score and possibly open doors for future financing.
- Monitor and Update: Keep track of your business finances and update your business plan. You may need additional funding – unsecured or secured – as your business grows, and a good track record will make this easier.
Remember that unsecured startup loans are generally considered high risk for lenders, so make sure you’re prepared to make a compelling case for your business. Good luck!
Why Unsecured Business Loans can be Great for your Startup
Unsecured loans can be a viable financial option for many startups and small businesses. Here are five reasons why these types of loans might be good for your company:
- No Collateral Required: One of the biggest advantages of unsecured loans is that they don’t require collateral. This is particularly beneficial for startups or small businesses that may not have valuable assets to put up as security. The absence of collateral makes the loan application process quicker and less complicated.
- Fast Access to Capital: Unsecured loans often come with a faster approval process compared to secured loans. Online lenders, in particular, use technology-driven platforms that can approve your loan application in a matter of hours or even minutes. This is crucial for startups needing immediate funding to capitalize on market opportunities or manage cash flow effectively.
- Flexibility in Use: Unlike some other types of loans that dictate how the borrowed money should be spent, unsecured loans often offer more flexibility. You can use the funds for a variety of business needs, from working capital and equipment purchase to marketing campaigns and expansion efforts.
- Simplified Application Process: The application process for unsecured loans is generally less cumbersome and requires less documentation than secured loans. This is particularly advantageous for startups or small businesses that may not have extensive financial records or business history.
- Build Credit History: If you’re a startup or a small business with limited credit history, an unsecured loan can help you build your business credit profile. Timely repayments will reflect positively on your credit report, which can be beneficial for securing additional financing in the future.
It’s essential to note that while unsecured loans have these advantages, they also typically come with higher interest rates compared to secured loans. Always read the loan agreement carefully, and consider consulting a financial advisor to determine if an unsecured loan is the best financing option for your business.
Here are 5 statistics related to unsecured startup business loans:
- Small businesses with less than $1 million in revenue received 77% of all unsecured loans in 2021. (Source: S&P Global Market Intelligence)
- The average amount of an unsecured small business loan was $107,000 in 2021. (Source: Finder)
- Unsecured business loan approval rates were 28% in 2021, up from 18% in 2020. (Source: Biz2Credit)
- 34% of small business owners reported using personal credit cards for business purposes in 2021. (Source: 2022 Small Business Credit Survey, Federal Reserve Banks)
- 51% of small businesses said access to capital negatively impacted their business in the last 12 months, as of early 2022. (Source: 2022 Small Business Credit Survey, Federal Reserve Banks)
What Happens If You Don’t Pay An Unsecured Business Loan?
If you don’t pay an unsecured business loan, there can be serious consequences, including:
- Late Fees and Penalties: Most lenders impose late fees and penalties for missed payments. These fees can add up quickly and make repaying the loan even more challenging.
- Negative Impact on Credit Score: Non-payment or late payments on a loan can negatively impact your business credit score. A lower credit score can make it difficult to secure future financing and can affect your ability to obtain favorable terms on other loans or credit lines.
- Collection Efforts: Lenders may employ collection agencies to recover the debt. These agencies may contact you and your business associates, which can be disruptive and damaging to your business’s reputation.
- Legal Action: In some cases, lenders may take legal action against you to recover the debt. This can lead to lawsuits, judgments, and potentially the seizure of assets to satisfy the debt. Example: Jimmy’s Tech Hardware took out a $20k loan in 2022 to pay off debt, assuming he would sell more hardware to make up for the interest. He sold 40% less than he anticipated in 2023. As a result, he had to default on the original unsecured loan.
- Default and Acceleration: If you consistently fail to make payments, the lender may declare your loan in default and demand immediate repayment of the entire outstanding balance. This can be financially burdensome and lead to business insolvency.
- Personal Liability: Depending on the type of business loan and your agreement with the lender, you may be personally liable for the debt. This means your personal assets could be at risk if the business can’t repay the loan.
- Damage to Business Reputation: Failing to meet financial obligations can damage your business’s reputation. Suppliers, partners, and customers may lose confidence in your ability to manage your finances.
- Difficulty in Obtaining Future Credit: A history of non-payment can make it challenging to secure financing from other lenders in the future. Lenders will view you as a higher risk borrower.