Business loan - no collateral

How to get a Small Business Loan without Collateral

In Franchise Financing, SBA Loans, Working Capital by Key Commercial Capital20 Comments

Broadly, there are two types of loans: secured and unsecured. There are dozens of types of loans depending on their nature, purpose, applicability, loan amount, interest and terms but they can all be classified as either secured or unsecured. Secured loans require collateral. It is a tangible asset that acts as the security. Unsecured loans don’t need such collateral or any security.

Now, there are small business loans that can be obtained with no collateral and there are many that need some kind of security.  If you want to buy an existing business, learn more about business acquisitions here. Let us consider the options at your disposal and which ones will be available with no collateral.

SBA Loans

SBA loans or loans that are backed by the Small Business Administration, a federal agency, do not typically need collateral.   Even startups can get business loans without collateral through the SBA. Technically, banks or lenders will not decline your business loan application if you have no collateral. However, there has to be some kind of security. You may extend a personal guarantee. There could be some assets, whatever form and shape, which may have some tangible value and that can be attached to the loan as security.

READ: List of requirements for SBA 7(a) loans

Loans Without Collateral

In case of microloans or loan guarantee program which is the 7a term loans, we can show how you can get approved to get a small business loan without collateral. Unsecured business loans are rare but possible through the SBA. In case of disaster recovery loans, the damaged property or asset will be used as collateral. In fixed asset loans backed by the SBA, the procurement itself is a form of security considered by the lenders.

Business Financing Advice

The advisors at Key Commercial Capital can assist you in understanding what options you have based on your situation.  There is no cost for an initial evaluation.  Read what our clients have to say about their experience on Google.  Call 833-444-4KEY or get started by completing our pre-qualification form.

Startup business loans, No collateral!

Learn more about the SBA Express Loan Here

ROBS 401K / 401K Business Financing

Use your retirement accounts (401(k) or IRA) to invest in your business without having to pay early withdrawal penalties or taxes.  If you still need more money, this can be used in combination with a SBA loan.  The investment into your business may be enough that no collateral is required.  Even if collateral would normally be required, an alternative such as a payment reserve and be utilized.  Learn more about 401K business financing.

Private Lenders

There are many private lenders or financial institutions that would be willing to entertain your loan application with no collateral, provided you offer some personal guarantee. You may use a cosigner, offer some asset or real estate as security or any kind of infrastructure or commodity that is worthwhile. This option is not strictly unsecured but there is the option to use various kinds of assets or commodities as personal guarantee which may work for many business owners. The interest rates of private lenders would be quite high as such loans don’t have backing of the government.

Unsecured Bank Loan – Non SBA

Crowd Financing

Crowd financing is a potential choice for loan seekers who have no collateral. There are peer to peer lending networks and many small to medium lenders that raise funds from various sources and offer unsecured loans. The loan amounts with this option may be less and the interests would be high but it is often the only option for many businesses.

Loans Rates

Right now, almost all SBA Guaranteed loans are variable.  For example, the loan rate for a no collateral SBA Express loan is currently Prime + 2.75%.  The prime rate can be found at the wall street journal webpage.

Credit Loans

Since there is no collateral for the SBA Express working capital loan, how do they determine who qualifies?  Credit is a primary factor when lending working capital without collateral.  Generally, you should have less than $15,000 in credit card debt, 10% of the loan amount as cash on hand and be able to show a 10% cash injection into your business.  Like a mortgage, these can not be borrowed funds, however gifts from family is usually acceptable.  Lastly, you need to show “comparable credit” comparable to the amount you wish to borrow.  Typically, anyone with a mortgage past or present would qualify.  Some exceptions are made for military veterans.

Funding a new Business

Borrowing money to fund a new business is typically very difficult.  In the past entrepreneurs have relied on friends, family, private investment, credit cards or personal assets.  The most obvious cause of failure in a business is simply running out of money, usually because of initial undercapitalization.

The SBA Express loan was created to fill this gap in startup financing.  Thousands of new business and franchise startups are funded every year without person collateral through this SBA product. If you are already in business for two years, this working capital loan is also available to your business.

Financing a franchise Business

One way to minimize the risks of opening a business is to invest in a franchise concept, rather than starting a stand-alone business. Up to 80% of new businesses have failed after five years, while franchises offer support, proven business practices, and a recognizable brand name to draw sales. Owning a franchise provides a proven business model to follow, while still offering the the benefits of owning a your own business.  Banks like financing franchise startups for the reasons stated above.

TIP: For a franchise to be eligible for SBA financing, they must be listed on the SBA Franchise Directory

SBA Express working capital loan

Click this link to learn why the SBA Express loan is the absolute best loan for a new or existing business to borrow working capital without personal collateral.


  1. I need a loan for my light and sound business.. Pls help me..

  2. I didn’t know about the SBA loans! It’s good to know that it’s possible to get an SBA without collateral. I will keep in mind that it’s best to have a personal guarantee or some other assets as security if you get a loan without collateral. Thanks for the information!

    1. Author

      You’re welcome Gina, when you’re ready to get a business funded, please keep us in mind.

  3. sir i need a loan tonsaatrt dairy farming in my village plzzz help me i did’t have a property or credit score im a fresh graduate plzzzz help me in this regard..

    1. Author

      Unfortunately, we can only help US businesses because most of our loans are backed by the US government via the SBA. Best of luck with your dairy farm, sorry we can’t be of further assistance.

  4. My business partner and myself would like to start investing in real estate. Our company will purchase properties, flip, and hold rental properties as well. We would like to get more information on what is needed to receive a loan. Any feedback would be great. Thank you in advance!

    1. Author

      Hi Katakyie,
      Real estate investment is a great business. However, the SBA will not guarantee loans for business that do what they consider speculation. Unfortunately, real estate investment is considered speculation. We may be able to get you a non SBA business line of credit up to 150K. If you are interested, please fill out our pre-qualification form and we will schedule a call to go over your options.

  5. I want to buy into a coffee franchise, but do not want a lien on my home. Is this possible?

    1. Author

      Hi Judi,

      Personal collateral requirements depend on the loan amount and the project. Does the coffee franchise involve commercial real estate or will the business be leasing a space? Collateral can be in different forms. Real estate equity is one form of collateral. Cash (in the form of a payment reserve or a CD) is another. We would need to know the specific project cost breakdown to know what might be possible. Rule of thumb would be to plan on 25% personal equity into the business and the bank will finance 75%. If it is preferred to avoid putting a lien on personal real estate, plan to have 18 months of loan payments to set aside in an escrow account at the bank as a payment reserve. The payment reserve can be released back to you after 2 years, as long as the business is showing good cash flow and making the loan payments without a problem. The other option is a CD held at the bank for the term of the loan. The CD is usually a smaller amount of funds than the payment reserve but is held for the entire term of the loan.

  6. hi looking to start a legal cultivation business in california legally, please let me know what i need to help get approved.

    1. Author

      SBA guidelines prohibits banks from issuing SBA-backed loans to any company that has a direct business relationship with a cannabis or hemp business

  7. I’d like to open a doggy daycare, I do not own a home and I have okay credit. Only debt I have is school loans all paid on time. Can you help?

    1. Author

      It depends on the amount your want to borrow and whether you can come up with a downpayment and payment reserve. My suggestion is to fill out our pre-qualification questions and we will setup a time to discuss your situation.

  8. Pingback: List Of Different Types of Loans To Get The Money You Need

  9. i need a loan of 50k to put up some sales in my ladies saloon.. no collateral at the moment but my account info could be useful with my bvn number and any other form of identification you may deem feet .. let me if am equal to having loan

  10. I am looking into opening a truck parts supplies shop/ body shop repairs/painting. I currently own one semi truck and use it for hauling agricultural products. my credit score is in the 600’s. Would I qualify for some type of loan? The local banks in my area have not qualified my for a small business loan, while others with worst credit than I get approved. The town I live in is small, so it’s like you have to know someone to get approved. If you know what I’m saying.
    Please help!!!

    1. Author

      Hi Nikki,
      I would recommend you work on raising your credit score first. Typically the minimum score for an SBA loan is 685. The requirements can vary depending on your net worth, income and years in business. Here are some quick tips on raising your credit score

      We have some non SBA loans, but those require either great personal credit or a history of business income.

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