Unsecured small business loans are loans that are not backed by an asset. Unlike common secured loans, like mortgages and auto loans, unsecured loans are not backed by collateral such as your house or car. Instead of using an asset to back the loan, the lender looks mainly at the borrower’s creditworthiness as an indicator of their ability to pay it back. Unsecured business loans are a good choice for small business owners who already have established cash flow. The business line of credit, short term loan, inventory loan, and working capital loan are all common types of unsecured loans.
If you have the cash flow and creditworthiness to qualify, unsecured small business loans can be a good choice. Applying for an unsecured loan is usually much easier than applying for a secured loan — there’s much less paperwork and documentation. Borrowers also usually receive their funding faster with an unsecured loan. Approval and funding is often received in days instead of months. And, if you have to default on your unsecured loan, you likely won’t have to give up your assets to the lender.
To apply for one of these unsecured business loans, you will have to prove your ability to pay back the loan with documentation such as bank statements and tax documents. Your credit score will also often be taken into consideration. Once approved, you and your lender will agree on a repayment schedule.
Even though approval and funding can be faster with unsecured loans, the best time to get a small business loan is before your business needs it. That way, you’ll be able to do your research, make a funding decision confidently, and get the best rates available.
1 The products and services related to small business loans listed above are provided by StreetShares, Inc. or its affiliates, not First State Bank. 2 This is not an offer of credit/ applications subject to individual credit approval in StreetShares’ discretion; standard terms and conditions apply; rates and amounts may vary; various factors impact rates, amounts, and duration of funding available, including credit approval and prior history of loans with StreetShares. 3 “Affordable interest rates” refers to StreetShares’ interest rates and fees when compared to the interest rates and fees charged by other online leaders.