Is your bad credit score a turn-off to lenders? If YES, here are 10 sources of unsecured small business loans with best interest rates and NO personal guarantee.
What are Unsecured Business Loans?
Unsecured business loans are small business financing options that don’t require the borrower to put forth any collateral for the loan. Secured business loans, on the other hand are loans that require a borrower to put forth a collateral. Unlike the secured loans, and unsecured loan would not require you to offer up any property (whether business or personal) to secure your financing.
Because they typically do not require any collateral, unsecured loan applications are often assessed on the basis of business cash flows, the borrower’s creditworthiness and sometimes the length of time the business has been running.
Unsecured business loans are usually short-term by nature to avoid the fortunes of the business changing and resulting in the borrower being unable to pay back the loan. These lenders are well versed with the fact that little things can cause great changes in a business’ fortune.
Depending on the company offering up the loan, unsecured business loans can be provided for anywhere from 3 months to 3 years, however, some peer-to-business lenders can provide an unsecured business loan for up to 5 years, though this is rare.
Unsecured loans can be used to finance any business-related costs, and it gives you the flexibility to smoothen your cash flow, purchase equipment, and access funds quickly. If you need to borrow money for your business fast, an unsecured business loan is unquestionably going to be your best option. They’re typically more readily available and faster to close than a secured loan, but the downside is going to be a higher interest rate.
However, even though an unsecured business loan is not backed by collateral, some lenders may still require you to sign a personal guarantee.
What is a Personal Guarantee on a Loan?
A personal guarantee is an unsecured written promise from a business owner and or business executive guaranteeing payment on an equipment lease or loan in the event the business does not pay. A personal guarantee gives a lender the right to go after your personal assets (like your home, car or cash) to recoup the loan if you fail to repay the debt. Since it is unsecured, a personal guarantee is not tied to a specific asset.
A personal guarantee is binding even if your business is not connected to you personally, like a corporation or limited liability company (LLC). If the corporation fails, for example, and cannot pay its bills, your personal guarantee can be activated by the lender. When you sign a personal guarantee on a business loan, it means that you’re on the hook for paying off all or part of your business’s debts if your business can’t.
Personal guarantees are usually demanded because lenders know that around 20% of small businesses with employees fail in their first year, while only about half make it past the fifth, according to a Bureau of Labor Statistics Study. Businesses in certain industries like construction and transportation are even more likely to fail in their first year. A personal guarantee reassures the bank that it’s going to get its funds whether or not your business survives.
Though they are few and far in-between, but they are a indeed unsecured business loans that do not require a borrower to put down personal guarantee. Some of them include;
10 Best Unsecured Business Loans With No Personal Guarantee and Their Interest Rates
Kabbage is one of the most flexible platform lenders that offer funding to qualified borrowers who have less established credit, or don’t have enough business history to get a loan from other sources. in addition to that, Kabbage does not require personal guarantee from the borrower.
Though its application is totally online, Kabbage would have to review the performance of your business through factors like shipping data and online sales – not just a credit score. This often makes Kabbage a good choice for online retailers, Amazon sellers, and small companies that make a lot of sales online.
Kabbage is a good option for borrowers with bad credit who need fast cash for short-term expenses. The company does not have a minimum qualifying credit score, and they are able to disburse funding fast. Once approved, you can get access to funds immediately or, at most, within a few days.
It comes with a short repayment time frame and a slightly higher APR. This kind of lender may not be your best option if you are looking for funding for a costly new equipment for your company. Kabbage can offer loan amounts from $2,000 to $250,000 and they repayment term is between 6 and 18 months.
It is simple to apply with Kabbage using its online application. It takes about 10 minutes to fill out the application, and approval can be gotten in 10 minutes or a few hours. Once you complete an online application, you’ll also need to provide Kabbage with a connection to your checking account or other business accounts. Kabbage can use information from connected accounts (e.g., Amazon, eBay, Etsy, QuickBooks, PayPal) to evaluate your annual revenues.
- APR: 24% to 99%.
Credibly is one of the lenders that give loans to people with less than perfect credit scores. This lender can give you up to $250,000, and the company does not require personal guarantees or a minimum credit score for its loans. Credibly offers a working capital loan for short-term needs and a business expansion loan for long-term investments.
Even though Credibly does not ask for credit score, but they demand that the borrowers business needs to be at least six months old, and their business should be able to boast of $10,000 in monthly revenue and bank account deposits. For the business expansion loan, you’ll also need an average daily bank account balance over $1,000. Credibly can get you funds in as quickly as two days after your loan application has been approved.
- Interest rate – 10% to 36%
Fundbox is another good choice for businesses that need short-term working capital, and do not want to offer up a personal guarantee for a loan. This lender provides a line of credit up to $100,000. This line of credit is expected to be repaid by the borrower weekly for up to 12 weeks, and funding is as fast as the next business day. To qualify, an entrepreneur should have a minimum of $50,000 annual revenue and must have been three months in business.
Fundbox financing is great for settling unpaid customer invoices and they likes, and the company also offers invoice financing. There’s no credit check or minimum annual revenue requirements, but you must use online accounting software that can link to Fundbox, such as QuickBooks, FreshBooks or Harvest.
Fundbox provides an unsecured cash advance with no collateral or personal guarantee requirement. Funding typically comes through in one to three business days. After receiving the cash advance, you’ll repay it in 12 or 24 equal weekly installments, plus a fee. If your customer pays you before then, you can repay the advance in full to save on fees, with no penalties attached.
You can expect an approval within 24 hours of applying in most cases and if you request for it. Fundbox typically funds unsecured business loan advances as soon as the next business day. If you meet its funding request cutoff time (before noon PST Monday to Thursday) and your request is not on a weekend or banking holiday, you’ll receive your funds the next day.
- APR: 10.1% to 79.8%
QuarterSpot is another lender to consider if you want an unsecured loan but you have an imperfect credit score. QuarterSpot can give a loan to the tune of to $150,000 without collateral or personal guarantee requirements. This is in fact one of your best options if you just need a small amount of money.
This company doesn’t require you to pay off an outstanding loan before applying and they can even buy out an existing loan. If QuarterSpot buys out your existing loan, they only require you to net 20% of the loan proceeds (many lenders require 50%).
You only need a minimum credit score of 550 to qualify for this loan. Your business will also need to be at least 1 year old with $100,000 in annual revenue, an average daily business bank account balance of $2,000 and 10 sales per month. You can receive funding in as little as one to two days.
- Interest rate – 20% to 48%
5. PayPal Working Capital
PayPal working capital is another loan source you can rely on if you need low capital, and your credit history is in shambles. PayPal lets you borrow up to 18% of your annual sales, up to a maximum of $97,000, and there are no collateral requirements neither does it require that you sign a personal guarantee form.
There are also no credit score minimums to qualify. Instead, you must have a business or premier account for at least three months and have at least $15,000 to $20,000 in annual PayPal revenue.
Because PayPal deposits funds directly to your PayPal account, you can receive funds within several minutes after being approved, making it a good choice if you need funds immediately. Repayment is also automatic and hassle-free, as payments are made as a fixed percentage of your daily PayPal sales.
With PayPal Working Capital, payments are flexible and change with your sales. But sales can sometimes vary, so there’s also a minimum repayment requirement. Depending on the loan terms you choose, you’ll need to pay at least 5% or 10% of your total loan amount (loan + the fixed fee) every 90 days.
PayPal Working Capital loans are relatively simple to qualify for if you are already a fairly active PayPal merchant. You just need to have a PayPal business or premium account for at least 3 months and a minimum of $15,000 (for business account holders) or $20,000 (for premium account holders) in annual PayPal sales.
- APR: 10% to 30%
Indeed, there may not be a lot of companies that give out unsecured loans that do not come with personal guarantees, because the borrowers also want to protect themselves. Considering the high APR that these unsecured loans without personal guarantees come with, some experts advise that it may even be better to go for secured loans if you have the collateral. The decision is ultimately up to you as you already know that needs and capabilities of your business.