What is an Unsecured Small business Loan?
An unsecured business loan is a financial option that allows you to obtain funding for your business without having to provide collateral, such as personal assets or real estate. This type of loan is different from a secured loan, which requires collateral to be put up as security for the loan.
Unsecured loans can be a good choice for businesses seeking short-term financing or a line of credit. Business owners with good credit scores may have an easier time obtaining an unsecured loan, although they may be charged higher interest rates compared to those with established businesses. Origination fees may also be assessed by the lender for issuing the unsecured loan.
The repayment period for an unsecured loan will vary, depending on the terms of the loan agreement. Overall, an unsecured loan can be a useful financing option for small businesses seeking a flexible and convenient way to fund their operations.
According to the National Small Business Association, many startups rely on some form of loan to help fund their operations. Additionally, a 2016 study by JPMorgan Chase & Co found that the median small business in the US had less than a month’s worth of cash on hand to cover expenses and loan repayments in the event of a three-month gap.
There are several advantages to using an unsecured loan for your business. One major benefit is that you don’t have to put any assets on the line to secure the loan. Instead, the loan is provided based on a personal guarantee. Another advantage of unsecured small business loans is that they are relatively easy to obtain, especially if you have a credit score above 600>.
Advantages of Unsecured Small Business Loan
Speed Funding
Unlike a secured loan, an unsecured small business loan is less time-consuming. Because in these, you guys don’t have to go through typical procedures. They are solely based on your personal guarantee and the market value of your business.
You won’t get this loan if one of these things is not credible. If you have everything right, then the unsecured loans can work as quick funding for your business.
Your assets are protected
As we have discussed before, you guys don’t have to put any collateral on the lender to get an unsecured loan. This means you don’t have to put your property or car to get the loan. This way, your assets are protected.
Banks and other traditional lenders can take over your property with secured loans. If you missed paying any mentioned repayments, but in unsecured loans, there is no such thing. You are the sole representative of your assets.
The high amount of loans
If you need a high amount to increase your business, then there is a chance that you can even get a larger loan. Very few lenders take that bigger risk, but it is not impossible. There is no limitation in unsecured loans like a secured loan that you will get the money that your assets are worth. You can apply for larger loans as well as unsecured business loans.
Criteria to get unsecured loans
There are a series of steps that you guys have to complete to get evaluated for your unsecured business loan. You have to look out for all these points when getting an unsecured small business loan.
- It is important to carefully consider the interest rate and APR of unsecured small business loans, as a high-interest rate can significantly increase the cost of borrowing. If the interest rate offered by a lender is too high, it may be worthwhile to explore other financing options.
- When seeking an unsecured loan, it is significant to choose a lender that can provide the funds quickly. There are many online companies, such as BitX Funding, that offer fast turnaround times for unsecured loans.
- When applying for an unsecured loan, it is essential to consider the minimum qualifications required by the lender. Selecting a lender with more lenient qualification criteria may increase your chances of approval.
- The term of an unsecured loan should be reasonable and should not include any hidden clauses. Be sure to carefully review the terms and conditions of any loan agreement before accepting it.
- Some unsecured loan companies may require a guarantee before issuing a loan. One option is to provide a blanket UCC filing, which can be used as a form of security for the loan.
These are a few steps you guys must keep in mind when getting an unsecured small business loan for yourself.
The best-unsecured business loans are:
BitX Funding: Best Overall Unsecured Business Loans for Small Businesses
BitX funding is one of the best online unsecured small business loans you can get if you have over 600 credit scores. The interest rate of this online lending platform starts from 7% only, and you can get a loan of up to $500,000.
Plus, BitX funding is best for unsecured business loans up to $500,000 with credit scores as low as 500. BitX Funding has various products like term loans and unsecured business lines of loans. If you want, you can apply for both.
BitX Funding Unsecured Business Finance Rates & Fees
BitX Funding’s interest rates for its line of credit start at 7%, and its term loan starts at 9%. Prime borrowers with strong creditworthiness and cash flows can benefit from its funding’s low starting interest rates. Similar to Loan Builder, there is no prepayment penalty, but you’re responsible for the full interest charge if you pay early (although you’ll likely receive a prepayment discount on the interest).
The BitX Funding term loan rates and fees are:
- Starting interest rates: As low as 7% simple interest for term loans up to 12 months and 9.99% AIR for term loans up to 36 months (prime borrowers with a minimum of 600 credit scores can get you potentially get you the lowest rates)
- Expected APR: ~7% to 20%
- Origination fee: 0% to 10% of your loan amount
- Prepayment penalty or termination fee: No prepayment penalty, but you owe the full interest charge if you repay early, with a potential prepayment discount applied
- Additional fees: None
- The BitX funding Capital line of credit rates and fees are:
- Starting interest rates: As low as 7% APR (prime borrowers with a minimum of 600 credit scores can potentially get the lowest rates)
- Expected APR: ~7% to 20%
- Origination fee: You have to pay a $20 maintenance fee.
- Prepayment penalty or termination fee: No prepayment penalty, but you owe the full interest charge if you repay early, with a potential prepayment discount applied
- Additional fees: None
BitX Funding’s lowest starting rates are comparable to those offered by the other lenders on our list, with APRs falling in the range of 7% to 20%.
BitX Funding Unsecured Business Finance Terms
The unsecured business line of credit product offered by BitX funding is revolving, meaning you can re-borrow the principal on the LOC as often as you repay it. BitX funding offers two unsecured business term loan products: a shorter-term loan (three to 12 months) and a longer short-term loan (15 to 36 months).
The loan terms you can expect from BitX Funding for its unsecured term loan include:
- Loan amount: $5,000 to $500,000
- Repayment term: Three to 84 months
- Repayment schedule: Daily, weekly, monthly
- Collateral: No UCC
- Personal guarantee: Required
The loan terms you can expect from BitX Funding for its unsecured line of credit include:
- Loan amount: Up to $100,000
- Repayment term: Revolving
- Repayment schedule: Monthly
- Collateral: Blanket No UCC
- Personal guarantee: Required
Of the online lenders on our list, BitX Funding’s maximum term loan amount of $500,000 is matched only by BitX. However, the longer repayment term, of 36 months, offered by BitX funding may be more appealing to some borrowers than BitX 52-week maximum term.
