While setting up a small business, most of the owners have a common doubt, ‘how to avail small business loans without a collateral?’ Business loans, as we all know, are of two types namely, secured and unsecured. Secured loans need collateral or an asset that acts as a security whereas unsecured loans do not need collateral.
Best Small Business Funding Options that requires no Collateral
If you are looking for business loans without collateral, go ahead and apply for unsecured loans. The market offers many such funding options that do not require collateral. Following is a list of some of the most popular ones:
- SBA Loans: Small Business Administration, a federal agency, backs the SBA loan that requires no collateral. If you are a start-up, looking for a business loan with no collateral, SBA loan is a perfect option. Although SBA loans require more processing time, have rigorous eligibility criteria and require efforts to apply, they are popular among small businesses as they don’t require collateral.
- Online Long Term Loans: The Internet offers many long terms and short terms loan options for the businesses. While a long-term business loan is more traditional, a short-term loan involves advancing an amount to the borrower, which is repaid on a daily or weekly basis. Although online short term loans are more expensive, they have relaxed eligibility requirements, thus are preferred by small businesses.
- Merchant Cash Advances: Even though merchant cash advances require some collateral, the financing company usually buys only the future assets of the business. When a small business avails merchant cash advance, the lender advances an amount which is repaid using a specific percentage of sales.
- Private Lenders: Considering the growing demand for business funding from various business owners, many private lenders offer funding options without collateral. They also offer a personal guarantee in the form of a commodity, an asset or a co-signer.
- Business Credit Cards: As a supplement to a traditional loan, business credit cards are a good funding option for small businesses. A 0% introductory APR card is the right option as this is an interest-free funding option and lasts for the period of specified introductory period.
Technological innovations have contributed to the appearance of many small businesses funding options. While applying for a business funding option that has no collateral, take care to identify which option suits your requirements.
If you feel that your business will do wonders in the coming years, you may go ahead to apply for a quick business funding option that requires no collateral.