No, we don’t mean the 2004 Tom Cruise movie; we mean business assets like real estate, equipment, or inventory—all of which get used to secure loans so the lender doesn’t come out empty-handed if you default. The vast majority of small-business loans get secured by some kind of collateral.
But what if you don’t have sufficient collateral to get a secured loan? Or what if you simply don’t want to offer any?
That’s where unsecured loans come in. Technically speaking, there really is no such thing as an “unsecured loan.” It’s an industry term that refers to a type of business loan that isn’t secured with specifically identified collateral. For example, many credit cards and lines of credit are considered unsecured.
Most online small-business lenders use a general lien on business assets and a personal guarantee to secure the loan. That means that even a business without assets that could be used as collateral can borrow funds. Because these loans aren’t secured with specific collateral, they are sometimes referred to as unsecured business loans.
Unsecured loans tend to have higher fees and shorter terms than their secured loan siblings—they pose more risk to lenders, after all—but they do provide an option for businesses to borrow even if they don’t have traditional collateral.
In this article, we’ll review the best unsecured business loans and help you decide if one could be right for you. Let’s get to it.