4 ways to secure a no-personal-guarantee business loan
If you are reading this, chances are you are an aspiring entrepreneur who's seeking a business but doesn't have any assets to back it up.
Enter small business loans with no personal guarantee, also known as unsecured business loans. This financing option is specifically designed for businesses that can't—or aren't willing to—put up anything as collateral.
This is often the case with startups or established businesses that have already pledged their assets to secure other loans.
But how do these unsecured business loans work? What are the risks? And what are the best business loans with no personal guarantee? This article takes a closer look.
What to know about business loans without personal guarantees
While unsecured business loans offer capital quicker than secured loans, there are a few things to be aware of:
- Smaller loan amounts - Due to the increased risk associated with unsecured loans, the amounts you can borrow with this type of financing may be lower than what you could obtain with a secured loan.
- Higher interest rates - If you cannot make payments, the lender has limited options to recoup the losses because they are not backed by collateral. Therefore, unsecured business loans carry higher interest rates to reflect this increased risk.
- Higher credit score - Unsecured business loans require you to have a high credit score. This ensures they are doing business with a borrower more likely to repay the loan in full.
Below are a few lenders that offer business loans with no personal guarantees:
Lines of credit
Business lines of credit are similar to credit cards, providing access to a pre-approved pool of funds with a fixed limit. Interest is only charged on the amount withdrawn, not the full limit.
With flexible repayment terms, you can apply for a line of credit of up to $250,000 if your business has been operating for more than 24 months and bringing in at least $40,000 in monthly revenues.
Bluevine will deposit the funds directly into your account within 24 hours. As you pay off your balance, your available credit will automatically replenish.
- Loan amount: Up to $250,000
- APR range: Starts at 6.2%
- Credit requirements: 625+ personal credit score
- Ratings: A+ Better Business Bureau (BBB) rating and 4.2-stars on Trustpilot from over 7,000 reviews
- Best for payroll, inventory buying, purchasing raw materials, and maintenance
With an average monthly revenue of at least $3,000 and a minimum of one year in business, you can qualify for a six, 12, or 18-month loan with corresponding monthly payments and no hassle.
American Express has no origination fees, annual fees, monthly maintenance fees, or application fees, giving you convenient and prompt access to the funds you need.
- Loan amount: $2,000-$250,000
- APR range: Unspecified
- Credit requirements: 660+
- Ratings: 4.5-star rating on Nerdwallet
- Best for managing cashflow and covering unexpected expenses
Business term loans are traditional loans provided by banks or other financial institutions that allow you to borrow a specified sum of money for a specified time, typically with fixed interest rates.
Bank of America
To qualify for an unsecured business loan from Bank of America, your businesses must have been incorporated for at least two years under the current ownership and have an annual revenue of $100,000 or more.
Preferred Rewards for Business members can get a reduction in the Business Advantage credit line's interest rate of between 0.25%-0.75%. The precise interest rate you're offered is subject to your creditworthiness and Bank of America relationship.
- Loan amount: $10,000-$100,000
- APR range: Starts at 7.25%
- Credit requirements: Unspecified
- Ratings: A- BBB rating and three starts on Nerdwallet
- Best for established businesses with pre-existing Bank of America accounts
Small businesses operating for at least 12 months and generating $100,000 in annual revenue can benefit from OnDeck's unsecured business loans.
These loans come with flexible repayment terms of up to 24 months and rapid funding of the next business day. OnDeck may also waive the remaining interest if you have a revised loan.
- Loan amount: $5,000-$250,000
- APR range: 52% average
- Credit requirements: 620+ personal credit score
- Rating: A+ BBB rating and 4.7-stars on Trustpilot based on over 3,900 reviews.
- Best for short-term business loans for funding payroll, equipment, or business expansion.
What happens if you default on small business loans with no personal guarantee?
If you do not pay an unsecured business loan on time, you may face severe consequences, including damaging your credit score, accumulating late fees and penalties, and even receiving legal action from creditors.
Your lender may increase the interest rate or turn the debt over to a collection agency, which could take the issue to court to pursue repayment methods such as deducting repayments from your salary or seizing your property to repay the debt.
When to get a business loan without a personal guarantee
A business loan with no personal guarantee is an ideal option for:
- Entrepreneurs looking to start a new business or expand their existing business without needing to secure a loan with personal assets
- Business owners who have a strong credit history and solid financials
When deciding if this type of loan is right for your business, it is important to consider your credit score, financial history, and ability to repay the loan.