Best Unsecured Business Loans in January 2024

OnDeck: Best for unsecured business loan for short-term loans

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*Minimum APR offered to at least 5% of customers (not the lowest rate offered).

Bank of America: Best for unsecured business loan for line of credit

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National Funding: Best for unsecured business loan for fast funding

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Fundbox: Best for unsecured business loan for startups

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Wells Fargo: Best for unsecured business loan for traditional bank

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Fora Financial: Best for unsecured business loan for bad credit

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Headway Capital: Best for unsecured business loan for working capital

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Accion Opportunity Fund: Best for unsecured business loan for minorities

The following types of business loans provide financing without collateral to help you tackle your short- and long-term business needs and projects.

Term loans

Small-business term loans provide a lump sum you must repay in installments with accruing interest. Long-term business loans usually require monthly payments, while short-term loans can have daily or weekly payments. Unsecured term loans typically have higher interest rates since they aren’t backed by collateral like secured term loans.

Line of credit

A business line of credit is a revolving credit line you can withdraw from as needed, only paying interest on the funds used. Similar to term loans, a line of credit can also be secured or unsecured. While an unsecured line of credit doesn’t require collateral, lenders may want you to provide a personal guarantee or lien. Providing collateral could help you access higher loan limits and lower interest rates with a secured line of credit.

Merchant cash advance

A merchant cash advance is an alternative form of business financing where you receive an upfront cash advance in exchange for a portion of your future sales. Merchant cash advances charge a factor rate instead of an interest rate, which can be tricky to understand.

Since this type of funding typically has less stringent eligibility requirements, it’s ideal for newer businesses looking for a startup business loan with no collateral.

Invoice factoring

With invoice factoring, you sell your outstanding invoices to a factoring company in exchange for an advance payment — typically 70% to 90% of the total invoice amount. You don’t need to provide collateral or a personal guarantee. After the factoring company collects payments on your behalf, they will deduct their fee and send you the remaining balance.

Here are five steps to get an unsecured business loan.

1. Calculate how much you need

A business budget can help determine how much you need to cover essential business expenses. Remember, unsecured business loans typically have higher interest rates. If you need to invest in long-term projects, you might be better off applying for an SBA or long-term business loan.

2. Evaluate your qualifications

Most lenders list their business loan requirements online, such as minimum credit score, annual revenue and any collateral requirement. While online lenders tend to have more lenient qualification requirements, they typically charge higher fees than conventional banks.

Before applying, check your credit scoresto know your eligibility options. Boosting your credit score today could help you qualify for more competitive offers in the future.

3. Research unsecured business lenders

Research lenders to find the best match for your business needs. Pay attention to hidden fees and extra costs since these can add up, making the loan cost more than expected. Also, check that the lender reports payments to the major credit bureaus to help you build your business credit.

Be sure to read small-business lender reviews before applying to stay aware of any predatory lenders.

4. Gather required documents

Although every lender will require different documents, you will likely need to provide a business plan, personal and business tax returns, financial statements and a balance sheet. Check a lender’s website beforehand to see what else might be required.

5. Apply and review

You can complete most unsecured business loan applications online, although some traditional banks might require an in-person visit. Unsecured loans typically have a faster timeline for approval and funding since the lender doesn’t have to review your assets.

If using an online lender, you could receive funds within one to three business days after approval. Otherwise, your unsecured loan could take up to two weeks to get approved.

If an unsecured business loan doesn’t fit your needs, here are some other funding options to consider:

SBA loans

Backed by the U.S. Small Business Administration, SBA loans offer low-cost funding solutions for small business owners who can’t qualify for traditional financing. The SBA 7(a) loan is ideal for general business expenses, the SBA CDC/504 loan is best for major fixed assets and the SBA microloan can help with short-term costs.

Note that the approval process for most SBA loans can take up to two months or longer, and you need a personal credit score of 680 or higher to qualify.

Small-business grants

Small-business grants can provide you with funds to grow and expand your business. Although these grants tend to be competitive, it’s worth the effort of applying to access free money for your business.

Business credit cards

If you need help financing everyday expenses or low-cost supplies, business credit cards are typically easier to qualify for than a small-business loan. Note that credit card interest rates usually run higher than traditional loans, and carrying a significant balance could hurt your credit score.

Crowdfunding

If you want a non-loan option, consider crowdfunding. For example, GoFundMe for business lets you create a business profile and broadcast a funding goal, collecting donations from friends, family and the public. Crowdfunding could be a good fit if your business has a solid online presence and fan base.