Small Business Startup Loans With No Collateral: Your 3 Best Options

Updated on April 4, 2024
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Can You Get a Startup Business Loan Without Collateral?

Small business startup loans that don’t require collateral are quite rare. Most any business loan type will require collateral to secure the loan. However, there are a few startup business loans that you can get without collateral, such as specific types of lines of credit, merchant cash advances, and business credit cards.

Here’s what you need to know when considering these unsecured business loans for your startup.

Small Business Startup Loans: No Collateral, No Problem

Any entrepreneur will tell you that starting a business isn’t cheap. There are lots of startup costs that you might not be aware of until you’re in the thick of it.

Luckily, paying out of pocket isn’t your only option. You should also consider small business startup loans, funding options that cater to new businesses by providing smaller loan amounts.

Finding loans that don’t require collateral presents another hurdle, but you do have options. Let’s take a look at three popular choices.

1. Unsecured Business Lines of Credit

Business lines of credit are some of the best business financing options out there. They offer borrowers flexible, revolving capital whenever they need it.

If you access a business line of credit through a more traditional lender, you’ll almost certainly have to offer up collateral to secure it. That said, many online alternative lenders have begun offering unsecured business lines of credit over the past couple of years, meaning you don’t have to pledge specific assets to secure your debt.

If you need access to quick, recurring funding—as most startups tend to—you should consider this your best startup business loan without a collateral requirement.

  • How Unsecured Lines of Credit Work

    Secured lines of credit are just like any other secured business loan—borrowers are required to put down collateral to be approved for them.

    With an unsecured line of credit, on the other hand, you won’t have to worry about risking your assets—personal or business—to get the financing you need. Beyond that, secured and unsecured lines of credit work just the same.

    You’ll be given a pool of funds that you can tap into whenever you want or need to. You’ll pay back what you borrowed—plus interest. Once you’ve paid the lender back in full, your line of credit gets refilled to its original amount.

    But when you apply for an unsecured business line of credit, be prepared to be approved for less capital at a higher interest rate. Unsecured lines of credit are riskier than their secured counterparts, so lenders will give you less credit and charge you more interest for the funds you end up drawing.

2. Merchant Cash Advances

If you’re searching for small business startup loans with no collateral necessary, you’re sure to come across merchant cash advances.

A merchant cash advance—sometimes called a cash advance loan—is a quick and easy way to get a startup business loan without collateral.

A merchant cash advance company can offer you a lump sum of capital that you can use to grow your business—and you’ll pay the lender back by allowing them to take a slice of your business’s daily credit card sales.

With no collateral required and poor credit scores accepted, merchant cash advance companies can meet your financing needs when you don’t qualify for other business loans. But proceed with caution: Merchant cash advances are the most expensive financing solution on the market.

  • Why Merchant Cash Advances Are So Expensive

    Merchant cash advance companies quote their prices in factor rates, usually ranging from 1.18 to 1.48. Multiply that factor rate by your loan amount to figure out the total amount you’ll owe.

    After that, convert your factor rate to APR. When you do the math, you’ll find that APRs on merchant cash advances can skyrocket—reaching the triple digits in the worst cases.

    The bottom line on merchant cash advances is this:

    As a small business owner who needs startup capital and can’t offer a lender collateral, a merchant cash advance can be easy to qualify for. But while they may fit the “startup business loans with no collateral” bill, they should always be a last resort for your business financing.

3. Business Credit Cards

If you’re just getting off the ground and you need small business startup loans with no collateral required, we recommend business credit cards over merchant cash advances. In fact, a business credit card might be your best option if you’re looking for startup business loans with no collateral.

When you’re in the early stages of your business, odds are you don’t want to apply for too much financing—you don’t know what kinds of costs will come your way, so you don’t want to take on more loan than you can handle. In this case, business credit cards can absolutely fit the bill.

Specifically, 0% introductory APR business credit cards are an excellent tool to pay for expenses up front and pay them off over a set number of months interest-free. Just keep in mind, you’ll want to make sure you can pay off your balance before this intro period expires and a variable APR sets in depending on the market and your creditworthiness.

  • When to Use a Business Credit Card as a Loan

    When should you pull the trigger on a business credit card over a loan (at least for now)?

    Well, here are a few rules of thumb.

    1. You don’t have time to wait around for a loan.
    2.  You need flexibility. 
    3. You don’t have much time in business.
    4. You have solid personal credit.
    5. You lack collateral.
    6. You know you’ll be able to pay off what you borrow.

    All in all, business credit cards can offer up affordable startup financing while you get your business up and running. Plus, they’ll allow you to leverage your personal credit to access business funds without offering up your personal assets. Business credit cards are a stellar way to tide your business over until you have enough business history to qualify for a more traditional form of funding.

Additional Funding Options: Self-Securing Business Loans

As we mentioned above, startup loan options that don’t require collateral can be very expensive for the borrower. So, before you take on an expensive loan because you don’t have any collateral to offer, consider self-securing business loans instead.

Here are the self-securing loan options to check out:

Equipment Financing

If you’re taking out a loan because you need to buy that first batch of expensive equipment for your startup, consider applying for equipment financing.

With an equipment loan, you can finance up to 100% of your equipment purchases. You’ll pay back a lender in monthly installments, and when you’ve paid in full, you own your equipment.

But when it comes to collateral requirements, here’s what’s great about equipment financing: The equipment itself acts as collateral for your loan. If you default on your loan, the lender will simply seize the equipment to recoup their losses. Your personal assets stay safe. This makes equipment financing a great option for startups and business owners who don’t have great credit.

Invoice Financing

If you own a service-based business and you’re constantly waiting on your customers to pay their invoices, you should consider invoice financing. With invoice financing, lenders can advance you cash for your outstanding invoices.

Here’s how it works: Invoice financing companies advance you a certain percentage of your outstanding invoices. They’ll hold onto the remaining percentage and charge fees for each week it takes for your customers to pay up. Once your customer has paid in full, you’ll get the reserve amount back, minus the lender’s fees.

With invoice financing, the invoices themselves serve as collateral for the loan. If your client never pays, then the most that can be collected is the initial amount of the invoice.

Top Lenders to Consider for Startup Business Loans

Business Lenders That Don't Require Collateral

Now that you know your options for startup business loans with no collateral requirements, which lenders should you approach to find the best loan for your business?

Here are some lenders for you to consider.

  • OnDeck

    OnDeck Capital offers unsecured lines of credit for small business owners.

    Their interest rates are slightly more competitive than some lenders offering startup business loans with no collateral required: Rates range from 27.2% to 99.9%—depending on your qualifications, namely your credit score (Rates based on loans originated in the half-year ending March 31, 2024; minimums provided are rates that at least 5% of customers received). To qualify with OnDeck, you’ll need a minimum of a 625 personal credit score.

    Read the full OnDeck review.

Business Lenders That Offer Self-Securing Loans

If you find yourself in the position where an equipment loan or invoice financing makes sense for you, then you should absolutely pursue these self-securing options.

With the ability to offer some reassurance to the lenders that they’ll get their money back, you’ll be able to score lower interest rates on these financing products.

If this is the best option for you, here are some lenders to consider working with.

  • Fundbox

    As an invoice factoring company, Fundbox offers cash advances based on your outstanding invoices.

    So if you’re constantly waiting on your customers to pay your invoices (and your cash flow is suffering because of it), try working with Fundbox to receive the cash you’re due while you wait. Fundbox will typically advance you a large percentage of the value of your invoices (up to $100,000), charging 0.5% each week the invoice goes unpaid. And of course, the invoice acts as collateral on the funds Fundbox advances you.

    Read more about Fundbox.

  • Balboa Capital

    Unlike Fundbox, which offers invoice financing, Balboa Capital is a purveyor of equipment financing products.

    Through Balboa Capital, you can finance a piece of equipment ranging from $3,000 to over $1 million on a term of up to five years.

    What’s more, Balboa Capital does not require a minimum personal credit score. You do, however, need an annual revenue north of $300,000.

    Learn more about Balboa Capital.

How Unsecured Business Loans Really Work

Maybe you don’t have any collateral to offer up to secure your startup business loan—or you don’t want to put your assets on the line. Whatever the case, you can still get a small business loan for your startup.

Keep in mind, though, when lenders give out unsecured business loans, they’re taking an even bigger risk on the borrower. If the borrower can’t repay their loan, the lender doesn’t have a specific asset that they can easily liquidate for cash.

Because unsecured business loans go to borrowers with riskier portfolios, they tend to have a higher price tag via interest rates.

Not to mention, there are very few (to none) truly unsecured business loans.


In most cases, even if you aren’t putting up a specific piece of collateral for a loan, the loans are being secured in other ways, such as a personal guarantee or blanket UCC lien.


Personal Guarantee

If you have a personal guarantee attached to your small business startup loan with no collateral requirements, you’ll still be on the line if you default on your loan. In short, your business is taking on the debt, but a personal guarantee will also make you, the individual business owner, responsible for the debt in case of default.

You shouldn’t be scared of a personal guarantee, but you do need to understand them before you commit to any financing.

Blanket UCC Lien

Even though lenders might not ask for a specific piece of collateral, many will file a UCC lien on your business. This means that if your business defaults on its startup business loan, they have a right to go after your assets to compensate for whatever remaining amount you owe them. So, if you really want to know how to get a startup business loan without collateral, the truth is you really can’t. You can, however, get financing with a personal guarantee or UCC lien, which is a much easier process and pretty much the industry standard.

Meredith Wood
Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email:
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