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How to Get Startup Business Loans With No Collateral

By Roy Rasmussen Reviewed By Mike Lucas
By Roy Rasmussen
By Roy Rasmussen Reviewed By Mike Lucas

If you’re seeking a startup business loan, you have options for financing. 

Unsecured business startup loans allow small business owners to obtain financing with no collateral, little credit history or bad credit. 

Depending on the situation, your company may be eligible for specialized guaranteed financing, such as loans to women, minorities or veterans. You also can find equipment loan opportunities if you’re a startup. 

  • What Are Startup Business Loans?

    Startup business loans provide funding for companies that have just launched operations. These loans often have lower credit or collateral requirements than conventional financing options.

    New business loans typically have higher interest rates or require personal guarantees because they’re perceived by lenders to be riskier than conventional financing. 

    Business owners seeking startup loans should expect to pay higher-than-normal interest and sign personal guarantees making them liable for any money lent to their company.

No Collateral Startup Business Loans

Small business startup loans and grants that don’t require collateral can come from a variety of sources, including:

SBA Loans

SBA loans are the most popular type of government loan for starting a business. When applying for an SBA loan, collateral has less to do with your eligibility than factors such as:

  • Whether your business is a for-profit venture
  • Whether your business operates in the U.S. or its territories
  • How much personal time and money you’ve invested in your company
  • Whether you’re unable to qualify for loans from other lenders

To qualify for an SBA loan, you’ll need:

  • A sound business plan, including a financial plan that demonstrates your long-term ability to repay your loan
  • To qualify as a small business in terms of how many employees you have and how much revenue you make

You’ll have the best chance to secure a loan from SBA lenders if your personal FICO credit score is 700 or more, which is considered “good,” although a lower score won’t necessarily disqualify you.

Meter with flowers illustration

Unsecured Business Line of Credit

Another option you can try is applying for an unsecured business line of credit. Unlike a secured line, you don’t need collateral for an unsecured line of credit. You do, however, need to convince your lender that you’re a good credit risk who can pay back the funding.

Most providers will want to see:

  • A minimum credit score of 600-620
  • A history of repaying loans on time
  • Evidence that you’ve been in business for at least 6 months for some lenders (or several years for others) and generate at least $100,000 in annual revenue

You’ll need documentation to back up your creditworthiness, such as bank statements, financial statements and tax returns.

Do you need a loan for your small business?

Business Grants

Even if you don’t have a good credit rating, you can still qualify for business grants. Unlike loans, grants don’t need to be repaid. 

Government agencies and private institutions award grants based on factors such as need or merit. You may qualify for a grant if you fall into an economically disadvantaged category or if your business boasts innovative potential.

You’ll need to research to find a grant you’re eligible for. Also, you’ll need to submit whatever grant proposal package your particular grant requires. This typically includes submitting a business plan.

Friends or Family

One of the most common ways to get a startup business loan with no collateral is to borrow from friends of family. 

You will stand a better chance of convincing friends and family to lend you money if you can show them a business plan explaining how you’ll generate enough revenue to pay them back. 

They might be more inclined to lend you money if you sign an agreement promising to pay them back in specified amounts according to a timetable just as you would with a regular lender.


Crowdfunding sites allow you to post about your business publicly to solicit support from online contributors. 

These funding platforms vary, with some relying on the goodwill of your audience to persuade them to contribute. Others offer contributors equity or function as peer-to-peer lending networks.

To run a successful crowdfunding campaign, you’ll want to compare sites to find the right platform for your business. You’ll then need a compelling story and persuasive pitch that makes your audience want to help you. A video can often help make your pitch more emotionally engaging.

Startup Business Loans: Bad Credit

While it’s easier to get a business loan if you have good credit, you may still be able to qualify for a loan with a lower credit rating. In some cases, you can even avoid a credit check entirely by applying for startup business loans using an employer identification number (EIN). 

Keep in mind financiers who are willing to lend to you if you have poor credit typically will require you to pay a higher interest rate.

If you have customers who owe you money, you may be able to obtain financing through invoice factoring. This is an arrangement where you sell a financial provider your unpaid invoices at a discount in exchange for a lump sum. They get repaid when they collect from your customers. 

Another alternative is revenue-based financing, where lenders agree to give you money now in exchange for a cut of your future revenue.

  • Financing Guaranteed

    You may come across the term guaranteed business loans in your quest for financing. This term can refer to loans backed by personal collateral, or it can refer to loans backed by the SBA. In the latter case, the SBA partners with a lender such as a bank or nonprofit and agrees to back the loan if you don’t repay it. 

    SBA guaranteed loans include several different programs:

    • 7(a) loans, which are long-term, low-rate loans up to $5 million that can be used for a flexible range of purposes, including startup expenses
    • CDC/504 loans, which are 10- to 25-year loans designed for purchasing major fixed assets, such as real estate or heavy equipment
    • Microloans, which are less than $50,000 with terms up to 6 years

    As with other SBA loans, lenders reviewing your eligibility will review factors such as personal credit, financial statements and how long you’ve been in business.

Startup Business Loans for Women

As U.S. businesses run by women continue to rise, the SBA, as well as some typical and alternative lenders, offer business loans geared toward female business owners. 

SBA loans are long-term loans and are easier to get for women with strong credit. Women with lower credit ratings or who need loans quickly may find more luck with sites that offer online business loans for startups. For women entrepreneurs who can’t qualify for larger loans or don’t need as much capital, microloans are an option.

Small Business Startup Loans for Minorities

As a minority business owner, you may be able to increase your chances of qualifying for an SBA-backed loan by participating in the SBA 8(a) business development program, which is geared toward leveling the playing field for “small disadvantaged businesses,” according to the agency.

Some lenders and institutions provide loan and financing opportunities for specific minority groups. For instance, the Department of the Interior’s Indian Affairs bureau has a Division of Capital Investment to promote access to funding for tribes and individuals.

Soldiers helmet with flowers illustration

Equipment Loans for Startup Business Owners

Equipment loans fall into a special category because when you’re taking out a loan for equipment, the equipment itself effectively serves as collateral. 

That means lenders extending these loans court less risk, which improves your odds of qualifying for financing. 

When applying for an equipment loan, you’ll need to provide a quote for the equipment you intend to buy, in addition to the documentation you would use to apply for other loans.

Pros and Cons of Startup Business Loans


  • Easier to qualify for than conventional financing
  • Low down-payment requirements
  • Often need to be in business for 6-24 months to qualify


  • Higher interest rates than conventional financing
  • Personal guarantees typically necessary
  • Financing is often short-term
  • Loan underwriting can be time-intensive, especially for government-guaranteed loans

No Collateral? No Problem

If you’re just starting a business, be sure to consider all of your options for startup financing. Even if you have poor credit or lack collateral, there are still plenty of financing opportunities available. 

Don’t let a lack of collateral keep you from finding the financial resources your business needs to succeed.

Roy Rasmussen Contributing Writer for Fast Capital 360
Roy is a respected, published author on topics including business coaching, small business management and business automation as well as an expert business plan writer and strategist.
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