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Best unsecured business loans in February 2024

Dec 22, 2023
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Unsecured business loans provide business owners with financing based on creditworthiness and business credentials. The best part about these loans is that no personal or business collateral is required to secure the loan. This is helpful if you don’t have assets to pledge as collateral or don’t want to risk offering up an asset that a lender can claim if you default on the loan.

Unsecured business loans have a number of benefits, including fast funding compared to secured loans since you don’t have to wait for an asset to be appraised. But business loans without collateral have drawbacks. For example, higher interest rates make them more expensive than secured business loans since the lender takes on more risk. 

To learn more, check out our picks for the best unsecured business loans, tips for finding the best loan for you and alternatives in case an unsecured loan isn’t right for you.

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Best for fast funding

4.4

Loan amount
$5k- $250K
Term: 6 - 12 months
Interest rate
Starting at 6.20%
Fastest funding
1 business day

Best for loan variety

4.4

Loan amount
$25k- $5M
Term: 6 - 300 months
Interest rate
Starting at 7.99%
Fastest funding
1 business day

4.6

Loan amount
$5k- $250K
Term: 18 - 24 months
Interest rate
Starting at 29.90% APR
Fastest funding
1 business day

Best for line of credit

4.5

Loan amount
$1k- $150K
Term: 3 - 6 months
Interest rate
Starting at 4.66%
Weekly fee
Fastest funding
1 business day

Best for Preferred Rewards members

4.3

Loan amount
$10k- $200K
Term: 12 - 60 months
Interest rate
Starting at 6.75%
Fastest funding
Not disclosed

Best for earning rewards

4.2

Loan amount
$10k- $150K
Interest rate
10.00- 18.00%
Fastest funding
Not disclosed

Compare the best unsecured business loans in February 2024

LENDER AND LOAN TYPE BEST FOR MIN. FICO CREDIT SCORE LOAN AMOUNT MIN. TIME IN BUSINESS
Bluevine Fast funding 625 Up to $250,000 24 months
SMB Compass Loan variety 600 $10,000 to $5 million 24 months
OnDeck Short-term loans 625 $5,000 to $250,000 12 months
Fundbox Line of credit 600 $1,000 to $150,000 6 months
Bank of America Preferred Rewards members 700 $10,000 and up 24 months
Wells Fargo Earning rewards 680 $10,000 to $150,000 24 months

A closer look at our top unsecured business loans

Bluevine: Best for fast funding

Overview: Bluevine is a financial tech company that specializes in serving small businesses. It was founded in 2013. This flexible line of credit allows term lengths of both six and 12 months. Payments can be made weekly or monthly. Bluevine also offers business checking accounts.

Why Bluevine is the best for fast funding: Bluevine states that you can get an approval decision in as little as five minutes and funds in as little as one day. It also advertises no monthly fees and on-demand access to a revolving line of credit. Loans can be managed through an online dashboard. 

Who Bluevine is good for: Bluevine is good for established businesses that can meet its somewhat high eligibility requirements. If you can qualify, it offers low-cost lines of credit.

SMB Compass: Best for loan variety

Overview: SMB Compass offers nine business loans. Some have low eligibility requirements, like a business or personal credit score of 600. This lender also goes further than many other lenders, offering plenty of details about its loans on its website.

Why SMB Compass is the best for loan variety: SMB Compass business loans have large limits and low starting rates. This includes lines of credit, SBA loans, bridge loans and purchase order financing. To see if you qualify for an unsecured option you just need to fill out a streamlined application, and someone will discuss your options with you.

Who SMB Compass is good for: SMB Compass offers low interest rates and a variety of loan products, making it ideal for borrowers who have different borrowing needs and who want to keep costs low. It does this while keeping applications quick and offering easier approvals than other lenders.

OnDeck: Best for short-term loans

Overview: OnDeck was founded in 2006 to help small businesses get funding entirely online. It’s eligibility requirements are more relaxed than many lenders, making it easier for business owners with bad credit to qualify for a term loan or business line of credit. OnDeck also reports your payments to the major business credit bureaus. That means on-time payments can help you increase your business credit score.    

Why OnDeck is the best for short-term loans: OnDeck offers quick approvals for term loans and lines of credit, letting borrowers get between $5,000 and $250,000. Its repayment terms go up to 24 months, which is longer than other online lenders that only offer loans for six to 18 months.

Who OnDeck is good for: OnDeck is good for smaller or new companies with fair credit that want to quickly borrow small amounts.

Fundbox: Best for line of credit

Overview: Fundbox is an online lender that focuses on quick applications and fast access to cash.

Why Fundbox is the best for line of credit: Fundbox offers a line of credit you can access as soon as the next day. You choose your own repayment plan each time you draw from the line of credit. There are no early prepayment fees, and small business owners with personal credit scores of 600 and six months in business are eligible.

Who Fundbox is good for: Fundbox is good for newer businesses because of its short minimum time in business requirement and low personal credit score requirement.

Bank of America: Best for Preferred Rewards members

Overview: Bank of America is the second-largest bank in the U.S. It offers unsecured term loans and unsecured business lines of credit. It also has a limited selection of secured options for borrowers who are new to credit or want to build credit.

Why Bank of America is the best for Preferred Rewards members: Borrowers can earn interest rate discounts and other perks through the Preferred Rewards for Business program. Plus, members with online banking IDs can apply online for the unsecured Business Advantage term loan.

Who Bank of America is good for: Bank of America is good for companies or individuals who already bank with the company. It’s also a good choice for business owners who want an in-person lending experience.

Wells Fargo: Best for earning rewards

Overview: Wells Fargo is one of the largest banks in the United States. Its loan products include SBA loans and some of the best lines of credit.

Why Wells Fargo is the best for earning rewards: Wells Fargo’s unsecured business lines of credit are for both newer and established businesses. Rates are low compared to the average business line of credit rates. They also offer the unique opportunity to earn rewards based on how you use credit. Each dollar you spend from the line of credit earns one point. You can redeem points for travel rewards, gift cards and more.

Who Wells Fargo is good for: Business owners with good-to-excellent credit who want to work with a traditional bank and who prefer long-term revolving lines of credit will get the best value out of Wells Fargo's long-term lines of credit.

What is an unsecured small business loan?

A small business loan is a form of financing used by business owners to cover expenses that help you start, run or grow your business. This may include purchasing inventory or equipment, covering cash-flow issues or even consolidating business debt

Loans for business owners can be secured or unsecured. A secured business loan requires business collateral, which is an asset or assets you agree to hand over if you fail to pay back the loan. 

With unsecured loans, you don’t have to provide any assets to secure the loan. 

How do unsecured business loans work? 

Since unsecured business loans don’t require you to put your business or other assets up for collateral, it’s a more low-risk option for borrowers but not for lenders. 

To prove you pose a low risk to the lender, lenders may have strict eligibility requirements for certain types of unsecured business loans. You’ll likely need good-to-excellent credit, at least two years’ time in business and a high annual revenue.

In place of collateral, lenders typically require you and other business owners to sign a personal guarantee, which makes anyone who signs it personally liable for the business debt. If your business fails to repay your unsecured loan, you are legally responsible for paying it. Lenders may take you to court to seize any personal assets to help pay off the debt.   

Requirements for an unsecured business loan

To qualify for most unsecured business loans, you’ll need to meet a few eligibility requirements. Common requirements include:

  • Revenue. Your company must earn enough money to make payments on the new loan.
  • Current debts. If you have too much debt and most of your revenue goes towards existing debt, lenders won’t give you a new loan that you’ll struggle to pay.
  • Time in business. Startups are risky, so many lenders want your company to have been operating for six months to two years before applying for a loan.
  • Credit score. Lenders will look at both your business and personal credit score. They may set a minimum personal credit score of 600 or 650 to get approved.
  • Industry. Some lenders refuse to lend to companies in certain industries like gambling or try to avoid loans in high-risk industries.

Types of unsecured business loans

Many types of business loans are available as unsecured loans. You’re likely to encounter the following: 
 

Term loan

Term loans provide a single lump sum and have a set amount of time — from a few months up to around five years — to repay it. They’re available from large banks and smaller digital lenders alike. But they can require high annual revenue and a personal guarantee.
 

Microloan

This type of loan offers limited borrowing amounts, usually around $50,000. They’re good for small businesses trying to get off the ground but may be too limited for businesses trying to scale higher. Rates can be a bit high, too.
 

Business line of credit

With business lines of credit, you have a set credit limit and draw period. These offer larger funding limits and lower rates than a business credit card. You can also borrow again once the original borrowed amount has been paid off. You may be limited to a certain number of draws per month or year.
 

Invoice factoring

This alternative loan involves selling your unpaid invoices to a factoring company, which then collects the invoice on your behalf and keeps a percentage. Fees may be steep, but invoice factoring can help you cover gaps in cash flow and are accessible options to borrowers with poor credit.
 

Merchant cash advance

This is a type of bad credit loan, which gets calculated based on credit card sales. You repay them with a percentage of your daily sales. New businesses with less established credit may find merchant cash advances (MCAs) the best available option. But MCAs aren’t technically loans and aren’t subject to usury laws. So they may have high fees, short repayment terms and interest rates may soar into the triple digits.

Average unsecured business loan rates

Unsecured business loans offer interest rates spanning anywhere from 7 percent to 99 percent. Interest rates differ widely based on your creditworthiness and the type of loan you’re getting. If you have decent credit, you can expect interest rates to stay on the lower end of this range. 

For example, a business line of credit from a traditional bank stays in the range of a 7.5 percent to 19 percent APR (annual percentage rate). But a merchant cash advance is known for skyrocketing rates, charging factor rates and fees that convert to 30 percent to 99 percent APRs. 

Pros and cons of unsecured business loans

Business loans without collateral have advantages and disadvantages.
 

Pros

  • No need to offer your business, equipment or real estate as collateral 
  • Faster application process since you don't have to wait for assets to get appraised
  • Some types of unsecured business loans are accessible even with bad credit

Cons

  • Lenders often charge higher fees and interest rates to compensate for their increased risk
  • Without collateral to secure the loan, lenders will be strict about who they approve for certain types of unsecured business loans
  • Not all lenders will offer fast funding
  • Some lenders ask you to offer a personal guarantee before approving the loan

Alternatives to unsecured small business loans

Unsecured loans are just one way for your company to raise money. If you’re looking for other options, consider these unsecured alternatives.

Where to get an unsecured business loan

You can get unsecured business loans from a variety of different sources.

One popular option is to look to an online lender. These lenders often offer faster approvals and are more flexible with their eligibility requirements. But costs can be quite high, repayment terms short and loan limits low.

Banks and credit unions are another popular source of loans. The application and funding process may take longer, and the lenders may be more picky about who they approve. But companies with strong credit are usually eligible for the best rates and large loans.

How to manage an unsecured business loan

Once you sign on the dotted lines, you now have the task of managing payments to keep your unsecured business loan and credit in good standing. Follow these steps to make sure you can manage your loan effectively.

  1. Read the loan agreement carefully to make sure you understand the payment schedule, fees, and terms to watch out for.
  2. Build and follow a budget that will let your company afford the payments.
  3. Pay your bills on time. Consider paying more than the minimum to reduce the overall cost of the loan.
  4. Avoid applying for new debt unnecessarily. Only get loans when they will help grow your business.
  5. Contact your lender as soon as possible if you’re facing financial difficulties.
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Bankrate Insight

Before you apply for an unsecured business loan, watch out for these red flags.

  • Application fees. Avoid lenders that ask for an upfront fee just to apply for a loan. There’s a good chance the lender will take the money and disappear.
  • Early repayment fees. Some lenders will try to make you pay a penalty if you decide to pay the loan off ahead of schedule. Where possible, apply for a loan from a lender that doesn’t charge this fee.
  • Time pressure. Walk away from any lender that’s trying to pressure you to act immediately without taking time to think about the loan.
  • Unusual funding or payment methods. Be wary of lenders promising to fund your loan or asking for payment in forms like gift cards or cryptocurrency.

Frequently asked questions about unsecured business loans

Methodology

Clock Wait
47
years in business
Credit Card Search
30+
lenders reviewed
Loan
22
loan features weighed
Rates
770+
data points collected

To choose the best unsecured business loans, we ensured all loans featured are broadly available across the United States and require no collateral. We then considered features that make loans affordable and accessible to businesses with different characteristics and needs, including interest rates, credit score requirements, minimum annual revenue and fees.

Lenders are given a rating between 1 and 5 based on analysis in five key areas: Accessibility, affordability, transparency, customer service and flexibility.

  • 4.5 or higher: Outstanding
  • 4 to 4.5: Excellent
  • 3.5 to 4: Good
  • 3.5 and under: Average