Unsecured Startup Business Loan

An unsecured startup business loan is the best option for thousands of entrepreneurs, and is sometimes the only option.

Thousands of people across the country you would love to run a business, but just do not have the necessary capital sitting in a bank account. Qualifying for a traditional bank loan is not always easy.

Businesses looking for hundreds of thousands of dollars, or even millions, are candidates for venture capital.  Businesses looking for very small amounts of money, under $5,000 are candidates for microloans.  All of the others -- about 95% of new businesses -- often find it more difficult to latch onto startup financing.

One of the best options for new businesses is an unsecured start up business loan.



The Importance of Collateral in a Business Loan

An unsecured loan is simply a loan which doesn't require any form of collateral. This means that you aren't required to use any of your burgeoning business assets such as real estate, inventory, or other assets in order to guarantee the loan.

This can be important with brand new businesses because at this initial stage of development many businesses simply don't have collateral.

With an unsecured start up business loan, not having any collateral to secure the loan means more people should be able to qualify for it. Generally, that is true.

Is An Unsecured Startup Business Loan Right For Your Business?

Generally, the no-collateral loan is based on your personal credit and repayment history. This loan works very much like a credit card with a monetary limit and fluctuating payments based on interest rates and how much of the money you have actually used.

As long as you have good credit and have made any other loan, credit card, or other repayments on time, then you should have no problems acquiring this type of loan.  Do check your credit record to make sure everything is in order there.

The Down Side To An Unsecured Startup Business Loan

Because these loans are unsecured, odds are they will carry a higher interest rate than secured loans, often very much higher.

Although it is smart to compare different loan companies to get the best deal, be wary of applying to too many of them.  Every time a company or lending institution checks your credit record they will see who else has been checking it as well. Sometimes if they see large numbers of potential rivals looking into this they may become concerned that you are over-stretching your true ability to make payments in a timely fashion.

How To Begin Searching For An Unsecured Business Loan

Once you are set there are a number of organizations and lending institutions which offer this type of loan. The best place to begin is with the Small Business Administration (SBA). The SBA was specifically developed to provide assistance for new business owners in all areas of owning and operating a business. While this organization doesn't loan money itself, it will provide you with a certified guaranty letter which will speed up the process of applying for loans with other institutions.

There are many banks, credit unions, and investment corporations which offer an unsecured start up business loan. You will want to shop around to make sure you get the best possible terms. Make sure you ask about the interest rates and the credit requirements for the loan before actually applying for the loan itself.

Just because you don't have the cash and the collateral available, this shouldn't be the limiting factor in starting up your new business. Take some time and look into the option of an unsecured start up business loan.

Return to top of Unsecured Startup Business Loan