So are unsecured business loans safe?
The answer is: Yes
An unsecured business loan does not require a guarantee by any definition. For your small business, this is an important safety net. And for you also, as you are the owner of your business. If something goes wrong and you cannot reimburse your loan, you need not worry about losing vital business or personal assets. It only increases the risk of your lender while this is an advantage for you. On another way, they can use to reduce their risk without collateral and that is, they will look upon for charging higher interest rates.
You don’t only have to worry about spending a lot of time applying for a loan. This way your personal property remains secure. You have a lot more flexibility to support your company as you can put money to use whenever you think it is time.
In other words, the removal of the need for collateral opens doors for many small businesses. So there is no question of a traditional business loan. Your only option is an unsecured business loan. Fortunately, various types of unsecured financing tools are available to businesses.
How do I get an unsecured business loan?
When I applied to receive an unsecured business loan, I was asked to send a business checking account in order to qualify for invoice financing without collateral.
There is also a need to connect your accounting software and have data with it for at least three months. There is no need for a minimum credit requirement.
The lender offered me up to $100,000 of funding with weekly payments for a maximum of 12 weeks. However, you may be required to sign a personal guarantee for the added value if you want a credit line to increase after your initial draw. The APR ranges between 10.1% and 68.7%.
Perhaps, there are some experts who do not agree. The amount you can borrow depends on the value of your collateral for any secured business loan. And that value cannot be borrowed 100 %. Therefore, you can get an unsecured business loan, because the value of your property is not limited.
What are unsecured business loans?
Unsecured business loans are a kind of finance where no collateral must be provided. This is the big difference between unsecured and secured business loans. Collateral means, primarily, valuable assets owned by you or your company.
However, with unsecured business loans, the lender can’t demand your assets.
The lender can’t follow your assets. An unsecured Small Business Loan is a non-collateral loan but based exclusively on small business borrower’s creditworthiness. While this kind of financing has previously been available to a very credible business borrower, it could be difficult for many small businesses to obtain unsecured small business loans with bad history
Can I get a personal loan without a personal guarantee?
A personal guarantee is something that is required some times when you need a business loan without collateral if they are unsecured loans.
Fortunately, without a personal guarantee, you are able to receive some business loans and lines of credit. And while it is better to charge higher interests rather than paying collateral or personal assets.
A personal guarantee which is sometimes essential to make you a co-signer (a person of your family member or friend who pledges to pay back the loan you can’t) in your business. If your company can’t pay off the debt, you’re liable for making the due payments.
And if that is not the case, the lender will be able to claim your personal assets, like house, car or repayment investments.
You may be obliged to sign a personal guarantee, depending on the lender if he asked. This way you agree to be responsible for paying the total amount of the loan or interest of the loan with an unlimited guarantee if your business fails to pay that. Usually, this happens when you are the sole owner of your business without any partner.
On the other hand, there is a limited personal guarantee common to companies with multiple owners. A percentage of the debt is assigned to each owner or partner and the liability is restricted to your share.