Best Unsecured Business Loans of June 2024

Table of Contents

Our picks for the best unsecured business loans

Best for long-term unsecured business loans

Bank of America’s unsecured business loan has competitive rates and loan terms that go up to 60 months, making it a good option for larger purchases that can be paid off over a long term.

It’s best for established businesses that have strong credit and want to avoid pledging high-value assets as collateral on a business loan. Certain benefits — such as the ability to apply online — are available to those who already hold accounts with Bank of America.

You have strong credit and at least two years in business.
You’d like to repay your loan over one year or more.
You want an unsecured loan with low interest rates.
You’re an existing Bank of America customer.

You’re a startup or have a lower credit score.
You need fast access to funds.
You’re looking for a simple online application experience.

Best for short-term unsecured business loans

OnDeck’s online business loan offers terms up to 24 months, with lower credit score and time in business requirements than traditional lenders. Due to the high payment frequency though (daily or weekly), this short-term loan option is best for businesses that have steady cash flow but can’t qualify with traditional lenders for other reasons, like time in business or personal credit score.

Though there’s no specific collateral requirement, it’s important to note that your loan will be secured by a general lien.

You want short-term funding for a specific business purpose.
You need access to funds in just a few days.
You’re a newer business (operating for at least one year) and/or have fair credit.

Best for fast unsecured business loans

Bluevine is an online lender that offers business funding up to $250,000, with a minimum credit score requirement of only 625. If you are approved, funds can be available to you in as little as 24 hours, which can make a huge difference if you’re in need of cash to cover a payment, or you’re trying to capitalize on a time-sensitive opportunity.

Speed aside, it’s prudent to make sure you know what you’re getting into with a loan from Bluevine. Payments may be as frequent as every week, and even though there’s no collateral requirement, your loan will be secured by a personal guarantee, which can put your personal finances at risk if you default.

You have at least two years in business and strong revenue.
You want to build business credit.
You’re looking for access to working capital within 24 hours of approval.

You’re a startup business.
You want to repay funds over a long period of time.
You’d prefer access to a sum of capital upfront (i.e. a term loan).

Best for unsecured business lines of credit

Wells Fargo’s Small Business Advantage Line of Credit is available to borrowers who have been in business for less than two years, with credit scores of at least 680. The line of credit is backed by the SBA, so businesses must meet other SBA standard requirements; however, the competitive rates make it a top choice for startup businesses.

You want access to more than $50,000 in funding.
You have fair or bad credit.
You need quick financing.

Best for easy unsecured business loans

Headway Capital’s line of credit requires only six months in business, a 625 minimum credit score and $4,200 in monthly revenue — making it an ideal option for startup businesses. The tradeoffs involve higher rates and draw fees; however, if approved, you can be funded as quickly as the following business day. Unlike other startup options, Headway will also work with you on repayment terms and payment options — terms can be up to 24 months and you can choose whether monthly or weekly payments work best for your business model.

You have at least six months in business and a credit score of 625 or higher.
You want fast access to working capital.

You need more than $100,000 in funding.
You want to build business credit.
You don’t want to pay a draw fee on your credit line.

Best for unsecured business loans for startups

Fundbox offers another startup-friendly unsecured line of credit to businesses that have only been in business for six months and have credit scores as low as 600. Like many online lenders, you can be funded very quickly after approval; however, you’ll also find higher rates, short terms and frequent payments, which can put your business at risk of default if you’re not careful.

You have at least six months in business and a credit score of 600 or higher.
You need funding within a few days.
You want to build business credit.
You don’t want to pay draw or account maintenance fees.

Best for unsecured business loans for borrowers with bad credit

Fora Financial will fund your business up to $1.5 million, even if your credit score is below 600 and you’ve only been in business for six months. This is a great option for businesses that have strong cash flow and are making a large purchase. Though you’ll get a discount for prepaying your loan, Fora uses factor rates that can often turn out to cost much more when compared to other lenders, and the longest term is less than two years, which means your monthly payments will likely be high.

You have a personal credit score of 570 or higher and at least six months in business.
You want a discount for prepaying your loan.

Your monthly revenue is less than $20,000.
You want to build business credit.
You prefer a longer repayment period (greater than 18 months).

Best for unsecured business loans for women and minority groups

Accion Opportunity Fund is a nonprofit community development financial institution (CDFI) whose mission is to provide access to capital for traditionally underserved communities of business owners, including women and minorities. They offer loans up to $250,000 with competitive rates, and are a good option for business owners that can’t qualify for traditional funding, or are wary of working with traditional lenders.

Though there are no collateral requirements, Accion does require a personal guarantee, which means that your personal finances may be at risk if you default on the business loan.

You have a personal credit score of 570 or higher and at least one year in business.
You want an unsecured business loan with competitive interest rates.
You’d prefer a longer repayment period (one year or more).
You’re a women-, minority- or veteran-owned business.

Best for unsecured invoice factoring

AltLine is an invoice factoring company, which means you sell your unpaid customer invoices to them, and they collect payment from your customers. There are no minimum credit score, annual revenue or time in business requirements, and funding can go up to $10 million.

Invoice factoring is a good option for B2B businesses that have a lot of cash tied up in unpaid invoices at any given time.

You’re a business-to-business company with funds held up by unpaid invoices.
You want affordable rates on invoice factoring.
You’re a startup and/or have a lower credit score, but have creditworthy customers.

You’re a business-to-consumer company.
You don’t want to sacrifice the full value of your invoices for faster access to funds.
You’d like to keep control of your invoices (in which case, you might try invoice financing instead).

Best for unsecured business loans with no personal guarantee

Most unsecured loans still require a personal guarantee, which can put your personal assets at risk if things go awry with your business. If avoiding a personal guarantee is your main concern, you may opt for a merchant cash advance. Credibly has a minimum credit score requirement of 500 and only needs six months in business; however, daily repayments are required and Credibly uses factor rates that can make it difficult to compare rates to other lenders.

You have a personal credit score in the 500s.
You have at least six months in business.
You have strong revenue from debit and credit card sales.
You don’t want to sign a personal guarantee.

You can qualify for a merchant cash advance alternative.
You want to repay funds over a long period of time.
You can’t afford a daily repayment schedule.
You don’t want to pay a monthly admin fee.

What is an unsecured business loan?

An unsecured business loan is a type of financing that doesn’t require you to pledge physical collateral — like business equipment, inventory or real estate — to secure funding. But even though physical collateral is not required, that doesn’t mean you’ll necessarily be off the hook if you can’t repay an unsecured loan: Most are backed by either a personal guarantee or Uniform Commercial Code lien.

A personal guarantee holds you personally responsible for the debt if your business cannot pay, and the lender can seize your personal assets to recover their losses in the case of default. A UCC lien gives a lender the right to seize your business assets if you’re unable to repay your loan. Lenders typically file UCC liens with your secretary of state’s office after you sign your loan agreement.

Your lender may file a lien on specific assets, or they might file a blanket lien, which allows them to seize any business assets necessary to recover their losses.

How do unsecured business loans work?

Unsecured business loans typically work like other types of debt financing — you apply for a loan, receive funds and pay back what you’ve borrowed over time with interest.

Unsecured business loans typically fund faster than secured business loans because the lender doesn’t have to check the value of your collateral. The lack of collateral, however, also makes them riskier for lenders. That’s why unsecured loans usually come with higher interest rates and require a personal guarantee.

Types of unsecured business loans

There are many different types of unsecured business financing, including:

Business term loans

Term loans are likely what you imagine when you think of a business loan. These loans are lump sums of capital that you borrow from a lender and repay over a set period of time. Term loans can be a good option if you need to make a specific investment or purchase for your business.

Business lines of credit

Credit lines are a flexible form of financing that allow you to borrow up to a certain limit and only pay interest on the money you borrow. You then repay the funds and continue to draw on the line. Unsecured business lines of credit can be used for working capital, as well as other short-term expenses. These products are also used as emergency funds.

Invoice factoring

Invoice factoring lets you sell your unpaid invoices for cash advances. The factoring company then takes control of your invoices and is responsible for collecting payments from your customers. Although factoring companies may want to see established invoicing practices and a certain amount of time in business, you may not have to provide a personal guarantee — since you’re selling an asset to them directly.

Merchant cash advance

With an MCA, a merchant cash advance company advances you cash based on your sales, and you repay them with a portion of your future sales. This type of financing is usually easier to qualify for than other business loans. Merchant cash advances are risky and expensive, however, and should be treated as an option of last resort.

Pros and cons of unsecured business loans

Pros

Physical collateral not required; you can get financing even if your business doesn’t have many physical assets.

Startups and borrowers with bad credit may qualify.

Cons

APRs typically higher than secured business loans.

Personal guarantee or UCC lien likely required.

Less desirable terms (e.g., lower loan amounts, shorter repayment terms).

Can be difficult to access the best options; you’ll likely need strong financials and credit to get the most competitive unsecured loans, typically offered by banks.

Where to get an unsecured business loan

You may be able to get an unsecured business loan from both traditional financial institutions, like banks and credit unions, and online lenders.

Generally, bank loans will offer the most competitive interest rates. However, to qualify for an unsecured loan from a bank, you’ll likely need multiple years in business, strong personal credit and excellent annual revenue.

In comparison, online lenders may have more flexible qualifications and can be faster to fund than traditional lenders. But like banks and credit unions, online lenders may also require a personal guarantee for a business loan without collateral.

How to get an unsecured business loan

Follow these four steps to get an unsecured business loan:

1. Determine your financing needs

You should consider how much funding you need and how much debt you can afford. A business loan calculator can help you estimate payments and interest costs.

2. Evaluate your business’s qualifications

If you’re not securing your loan with collateral, your lender will rely more heavily on traditional business loan requirements, such as personal credit score, annual revenue and time in business.

Although online lenders often accept startups and borrowers with bad credit, these businesses may receive higher interest rates. Established businesses with good credit and strong finances will be able to access the most desirable rates and terms.

3. Compare lenders

You’ll want to research different lenders to find the best choice for your business. As you compare your options, you should think about factors such as maximum loan amounts, interest rates, repayment terms and fees. You’ll also want to consider a lender’s application process, time to funding, customer service and reputation.

🤓 Nerdy Tip

Keep an eye out for predatory lenders who impose unfair or deceitful loan terms on a borrower, and target high-risk borrowers in particular. To avoid these lenders and scams, always look for transparent terms and rates, compare fees to reputable lenders and check to see if the lender reports to one of the three major credit bureaus.

4. Submit an application

Although application requirements vary by lender, you’ll typically need to provide:

Basic information about you and your business.
Business and personal tax returns.
Business and personal bank statements.
Financial statements.

Online lenders often expedite the underwriting process by allowing you to connect your financial accounts directly to their platforms. You may be able to get a business loan from an online lender in as little as 24 hours. Banks and credit unions, on the other hand, may take several days, or even weeks.

Alternatives to unsecured business loans

If you don’t think an unsecured business loan is a good option for your business, you might consider these alternatives:

SBA loans. SBA loans are partially guaranteed by the U.S. Small Business Administration and issued by banks and credit unions. These loans offer long repayment terms and low interest rates. Although all SBA loans require a personal guarantee, you may not need to provide physical collateral for SBA 7(a) loans of $50,000 or less. You will, however, likely need good credit and strong finances to qualify.
Business credit cards. If your time in business is too short to qualify for an online business loan, business credit cards for startups are typically available to companies of all ages. Business credit cards offer flexible, unsecured financing that you can use for everyday spending as well as larger purchases, depending on your credit limit. You’ll likely still need to provide a personal guarantee, though.
Small-business grants. Small-business grants can be a good option if you want to avoid taking on debt — or can’t yet qualify for affordable financing. It can be time-consuming to find and apply for the right grant for your business — but if you can secure one, you have access to free funds you don’t need to repay.
Crowdfunding. Crowdfunding can also be worth considering if your business doesn’t quite meet traditional loan requirements. You can create a business profile on a crowdfunding platform, like Kickstarter, and publish a funding goal to raise money from the public. Typically, you’ll offer some type of reward or equity in exchange for funds. Crowdfunding can be a particularly good choice for product-based businesses that have an internet following.

Frequently asked questions

Banks can give unsecured business loans, although they’ll likely be harder to qualify for than those from online lenders. National banks like Bank of America, Wells Fargo and PNC Bank all offer unsecured business loans.

It can be easy and fast to get an unsecured business loan, especially if you have good credit and strong finances. Startups and businesses with bad credit may have a more difficult time acquiring funding.

If you default on an unsecured business loan, your lender may turn the loan over to a collections agency in an attempt to recover payment. Your lender can also use the lien or personal guarantee they have in place to claim your business or personal assets to recoup their losses.

Unsecured business loans can help you build business credit if your lender reports payment activity to the commercial credit bureaus — and you make timely payments. If your lender reports to the commercial credit bureaus, and you don’t pay on time, however, your credit score can be negatively impacted.

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Tags: Business June Loans Unsecured

Best Unsecured Business Loans of June 2024

Our picks for the best unsecured business loans

What is an unsecured business loan?

How do unsecured business loans work?