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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

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. Some are unsecured. However, these types of financing agreements typically have higher interest rates, shorter terms or require personal guarantees

What Is Unsecured, No-Collateral Financing? 

A no-collateral business loan doesn’t require a borrower to put up any assets to secure a loan. In contrast, for secured loans (loans that require collateral), a borrower must offer high-value property to the lender, such as real estate, vehicles or other property the lender can seize and sell should the borrower default.

Meter with flowers illustration

No-Collateral Startup Business Loans and Financing 

There are a few small business startup loans that don’t require collateral, including the following. 

Unsecured Business Loans

An unsecured business loan is one type of financing that doesn’t require collateral, though they often require a personal guarantee, blanket lien against the business’s assets or both.  

Unsecured business loans are commonly offered through alternative lenders as short-term loans and often have higher interest rates than other loan types. That said, they are typically quick to fund and are a good option for business owners who need cash fast and don’t have specific assets to pledge.

With these types of loans, a small business owner’s ability to qualify directly depends on their credit profile and business revenue. 

  • Fast Capital 360’s lending partners offer short-term, no-collateral loans to applicants who meet these requirements:

    • Minimum 540 credit score
    • $75,000 or more in annual revenue
    • Minimum of 1 year in business


Unsecured Business Line of Credit

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

Most providers will want to see:

  • Minimum credit score of 600-620
  • 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.

Merchant Cash Advances 

A merchant cash advance is another alternative funding solution that doesn’t require collateral. They are commonly offered by online lenders and are a viable financing option for business owners who don’t have assets to pledge and need fast access to funds. Advances can sometimes be issued as quickly as a day after approval. 

With this type of financing, a provider gives the borrower a lump sum of capital, which is lent against a business’s future sales. 

Merchant cash advance providers offset their risk by charging higher interest rates, known as factor rates, and requiring more frequent payments over a short term.

Most commonly, a business will repay its advance through daily, or sometimes weekly, payments until the total cash advance and lender fees are paid in full.

Do you need a loan for your small business?

SBA Loans

SBA loans are the most popular type of government loan for starting a business. While most SBA funding options do require some collateral, lenders are not required to take collateral for certain loans of less than $25,000 (i.e., SBA 7(a) and Express loans). 

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)
  • To operate a for-profit venture in the U.S. or its territories
  • Be unable to qualify for loans from other lenders

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.

  • Financing Guaranteed

    You may come across the term “guaranteed business loans” in your quest for financing. This term refers to loans for which a person or entity pledges responsibility for the debt if the borrower defaults. An example of this is loans backed by the SBA, in which the SBA partners with a lender and agrees to back the loan if you don’t repay it. 

Pros and Cons of No-Collateral Startup Business Loans


  • Easier to qualify for than conventional financing
  • Low down-payment requirements


  • Higher interest rates than conventional financing
  • Personal guarantees are typically necessary
  • Financing is often short-term

Alternatives to No-Collateral Small Business Loans

In addition to no-collateral small business loans, consider other options to fund your capital needs. Here are a few alternatives. 

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 or 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 make your pitch more emotionally engaging.

Credit Cards

Credit cards are another no-collateral business funding option. They’re a popular form of financing sought by many business owners. In fact, according to the Federal Reserve Banks’ Small Business Credit Survey, 21% of the businesses surveyed applied for credit cards. 

Unsecured credit cards, which don’t require any deposit as would be needed with a secured credit card, are common. Factors lenders consider when evaluating applicants include the following:

  • Industry
  • Revenue 
  • Company structure
  • Monthly expenses
  • Years in business 

Invoice Financing 

Invoice financing is another short-term funding solution, specifically for business-to-business companies. Businesses use their unpaid invoices as collateral to qualify for funding. Invoice financing providers may offer you capital through a one-time advance or as a line of credit. With this type of funding, you stay in control of collecting your unpaid accounts receivables from your customers but repay your lender in prearranged installments until your advance is paid in full. 

Similarly, if you have customers who owe you money, you may obtain financing through invoice factoring. This arrangement allows you to sell a financial provider your unpaid invoices at a discount in exchange for a lump sum. In this funding solution, they take over collecting your customer receivables for you, and they get repaid when they collect from your customers. 

Equipment Loans

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

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. This is often the case with alternative online lenders, who typically have less stringent requirements for approval. 

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

Soldiers helmet with flowers illustration

Startup Business Loans for Women

As U.S. businesses run by women continue to rise, the SBA and some conventional and alternative lenders offer business loans to help female business owners succeed. 

SBA loans are long-term loans and more accessible for those with solid credit. Women with lower credit ratings or who need loans quickly may find more luck with sites that offer online business loans for startups. Microloans are an option for women entrepreneurs who can’t qualify for larger loans or don’t need as much capital.

Examples of organizations offering financing opportunities and assistance to women business owners include the Association of Women’s Business Centers and the SBA’s Office of Women’s Business Ownership.

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.

Other organizations that help startup minority businesses access capital include Accion and NMSDC Business Consortium Fund.

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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