When running a small business, there comes a time when you need an injection of cash and might consider getting an unsecured loan. This can be for any business-related purpose from meeting a large order or paying a supplier. The loan has to be purposeful and beneficial to the business otherwise it just lands it into more debt. There are many lenders today who have unsecured loans option to offer small business owners at competitive rates.
Take your time and decide why you want the loan in the first place and how much is enough. Follow this by doing thorough research on different lenders and the requirements they have before making a decision. There is a lot of competition among lenders which gives you an opportunity to get a good loan with better terms. Remember you don’t want to strain the business with high monthly payment. Therefore, apply for a loan you can pay back with ease. You can also consider loans for poor credit score in case your rate is low.
The top loans are discussed in this article to help you narrow down the best one for your small business. The amounts vary from one lender to the next. Interest rates are different as well which are important to determine just how much you should pay back each month.
What is an Unsecured Loan?
An unsecured business loan is one that requires no collateral to acquire from a lender. This is a great funding solution for a small business that needs an injection of quick cash to meet a certain purpose related to the business. Unlike the personal loan that requires you to have a good credit score, the unsecured business loans need the business to have a good credit rating. Bring your financial details to the lender showing good forecast and history that is good financially for the lender to even consider loaning you the money.
With the unsecured business loan, keep in mind that the interest rate charged is quite high. This is because the lender shoulders the bulk of the risk involved by loaning you the money without any collateral to secure it. At the end of the repayment period, you end up paying back much more than you had borrowed. This is one of the disadvantages of unsecured business loans.
Still, this is the best way to get money fast to put into a business to cover its needs. Ensure all your finances are in order, including the analysis of your business, before you seek out a lender. You must be creditworthy by proving to the lender that you can meet the monthly loan repayment for the period. The time of repaying the loan is shorter as compared to that of a secured business loan. Also, the amount received is low compared to the loan received with collateral.
What is a Small Business?
Everywhere you turn there are small businesses along the streets. But how do you determine the size of a business? Small businesses are said to be the backbone of every economy and provide the highest rate of employment of any other industry. With high rates of unemployment experienced in many parts of the world, most governments encourage citizens to establish small businesses to earn their upkeep.
When it comes to understanding small businesses, first understand that most are retail or service-oriented with few employees. They are privately owned and can range from sole proprietorship, partnerships to corporations. Their annual revenue is significantly lower than that of mid-sized businesses. Small hotels, restaurants, pubs, grocery stores, drug stores, among others are all examples of these businesses.
These are businesses that offer products and services to the immediate community and don’t usually venture further than that. They operate on low budgets and often require cash injections to meet orders that are larger than what is normal to them. Most small businesses are run by one to three people who put in long hours for it to survive. Physical labor is quite intensive. It calls for the owner to run the store from sunrise to sunset usually 6 to 7 days a week.
Unsecured Loans for Small Businesses
| Lender | Max. Loan Limit | Credit Rating Score | Lowest Interest Rate | Min. Years in Operation | Min. Annual Income |
| Bluevine | $5000000 | 600 | 4.8% | 6 months | $100000 |
| Lendio | $5000000 | 660 | 7.5% | 6 months | $50000 |
| OnDeck | $500000 | 600 | 9% | 12 months | $100000 |
| Smartbiz | $5000000 | 650 | 6.66% | 6 months | $100000 |
| Streetshares | $250000 | 620 | 8.00% | 12 months | $50000 |
| Noble Funding | $2000000 | 650 | 9.99% | 18 months | $100000 |
1. Bluevine
The lender offers unsecured business loans to small business owners in need of a quick injection of cash. You should produce documentation to prove the business has been in operation for more than 6 months to qualify for this loan. The lender offers you a loan of up to $5000000 payable on 6 ½ months to 13 months. This is why it’s important to have a plan and purpose before applying for any business loan. The lender charges a fixed interest rate of 4.8% and payment is made monthly.
There are no origination fees charged on the loan amount you receive from this lender. The lender requires your business to have a credit rating score of 600 to apply for this loan. The business should have minimum annual revenue of not less than $100000.
Pros
- Good loan limit of up to $5000000
- Low-interest rate charged from 4.8%
- No origination fees
Cons
- Must be in business for more than 6 months
- Short repayment period of 6 ½ to 13 months
2. Lendio
This is the lender that most small business owners seek for unsecured loans to fund their operations. The company works more to match you with a loan that suits your business. Lendio company matches you with a good lender that meets your needs after you fill in the application form. The loan limits that you can expect are up to $5000000 from the lenders that you are given to choose from.
The interest rate charged starts from 7.5% which is not low compared to other lenders in the market. The repayment period is from 1 to 5 years. To qualify for any of the loans that this company picks out for you, you must have an annual income of $50000 and above. The business must have been operational for more than 6 months as well. The credit rating score that is considered for the loan is 660 and above from any applying small business. The loan takes 2 to 7 days to process
Pros
- Long repayment period of 1 to 5 years
- Large loan limit of $5milliom
- Short processing time from 2 to 7 days
Cons
- High credit rating score of 660 and above
3. OnDeck
OnDeck offers small businesses unsecured loans and also lines of credit for those seeking such services. The limit of the amount OnDeck can lend your business is set at $500000 which is significantly lower as compared to other lenders in the industry. One advantage of this loan is it takes little time to process. If you meet all the criteria, you can have the funds at the end of the day with a few forms to fill. This makes it the ideal loan when you have a business emergency in need of fast cash.
Meet the minimum credit rating score set at 600 to qualify for the loan. The business has to prove it’s been operational for more than 12 months and have an annual income of $100000 or more. Ensure you have all your financial documents with you for faster processing. The interest rate charged starts from 9% which is high compared to other lenders with lower rates. There is an origination fee charged between 2.5% and 4%.
Pros
- Fast processing of up to one day
- Low credit rating score of 600
Cons
- Low loan limit of $500000
- Origination fees charged on the loan
4. Smartbiz
When applying for this loan, you must have a strong credit score rating for the lender to even consider your application. One major qualification is for the business to be in operation for more than 6 months. The advantage of this loan is that it’s backed by the government and offers hope to businesses that have failed to secure quick funding for their small businesses.
The minimum loan amount you can apply for is $30000 and the maximum is set at $5000000. The repayment term for this loan is set at 2 to 5 years which is longer than what other lenders offer. The credit score rating required is 650 and the business should have an annual income of $100000.
Pros
- Short processing time
- Large loan limit of up to $5000000
- Good repayment period of 2 to 5 years
Cons
- Requires high credit score of 650 and above
5. Streetshares
The lender funds US citizens running small businesses within the country. The business must have been operational for more than one year. In some special circumstances, the lender can consider 6 months of operation as well. Ensure that you have an annual income of more than $50000 before applying for this unsecured loan. Any lower amount is not accepted by the lender.
The lender will check on your credit score before processing the loan. The minimum accepted score is 620 and anything lower than this is grounds for automatic disqualification. The interest rate charged is set at 8.00% to 39.99% depending on the amount borrowed. You can borrow from as little as $2000 to a maximum amount of $250000. The origination fee charged on the borrowed amount is between 3.95 to 4.95%. There is a late payment fee charged at 10% as well.
Pros
- Annual revenue set at $50000
- Maximum loan of $250000
Cons
- Origination and late fees charged on the loan
- High-interest rate starting at 8%
6. Noble Funding
You can get the best unsecured loan to fund your business from Noble Funding. Though the loans are quick to get, the lender charges high interest and requires the loan to be paid back in a short term. You can get your loan approval on the same day provided you have all the required documents for the business. No lender can offer you for a loan without detailed financial documents on the business performance. This proves your creditworthiness and ability to pay back the loan.
The loan dispensed can be up to $2000000 and to qualify for it you need a credit rating score of 650 and above. Another qualification is the business to have been operational for more than 18 months. The interest rate charged starts from 9.99% which is significantly higher compared to other lenders in the industry. Be ready to pay back the loan in 3 to 5 years.
Pros
- Same-day processing if you qualify for the loan
- Large limit of up to $2000000
- Good repayment period of 3 to 5 years
Cons
- Business must be operational for more than 18 months
Conclusion
Like any other loan be clear about the purpose of it before you even think of applying for one. If you can get another option to fund the business then it’s better to explore them if they have a lower risk. The unsecured business loans discussed here are fairly easy to secure if you meet the qualifications set by each lender. The lenders require you to have a high credit rating score and for the business to have been operational for some time. The duration varies from one lender to the other.
Once you figure out what the loan is for and create a budget for it, shop around to get the best lender. Aim for a larger loan limit with a lower interest rate and longer repayment term. Additional fees like origination fees, late fees among others should be taken into consideration as well.