can you get a small business loan without collateral
Jack Richings

Jack Richings

Can You Get A Small Business Loan Without Collateral?

Starting a business can be great, but risky. Securing a loan under your assets just adds to this risk. So can you get a small business loan without collateral?

Starting a new business is an exciting endeavor, but it is also a challenging one at the same time. It poses great opportunity, but also great risk. If you need financial assistance in the form of a business loan then often, this loan will need securing against assets. This just poses a greater risk. But can you get a small business loan without collateral?

Lots of time, energy, and resources go into a small business. Often, this effort comes with very little return in the initial months. Therefore, it can take the help of a small business loan to get your business moving. The costs can add up quickly and it can be hard to take a risk when it means putting up your home or car as collateral. So let’s discuss your options. You don’t have to put your assets on the line in order to get a small business loan.

What Is A Small Business Loan?

Firstly, let’s take a look at what a small business loan is and how to apply for one. When starting up a small business, there are a lot of unknowns and challenges that crop up along the way. Understandably, when taking out a loan, many lenders expect you to secure your loan with collateral. This reduces their risk of funding your business idea. 

By letting you borrow the money, they want something of equal value offered up against the loan to secure it. This is often your house, car, or another big-ticket item. Of course, this then places the risk back onto you. As a result, it can become a risky endeavor and put you off chasing your business dream. So, can you get a small business loan without collateral?

small business loan without collateral

Can You Get A Small Business Loan Without Collateral?

The simple answer: yes! These are simply known as unsecured loans, and they are offered by alternative lenders. These lenders will take a look at the strength of your business and will approve based on their assessment. This means you need to have bank statements readily available and a good credit rating to back you. You can generally borrow up to $600,000 depending on your business financials and how long your business has been up and running. 

If you are just starting out with your business and are looking to take out a loan, this is an option too, but it is much harder. Most non-lenders will want a good record of your revenue for about a year to consider you worth the risk.

small business loan

Things To Consider Before Taking Out A Business Loan

We have explained that you know you can get a small business loan without collateral. So next, here are some things you should consider before going ahead. 

  1. Do you have a business plan in place: This is an in-depth plan that looks at your business or business to be and your potential earning revenue. Whether you are planning at taking out a loan or not, this is good practice when setting up your own business. It’s an outline for your business with goals, strategies, and details that map out how you plan to achieve success.
  2. Check you have the cash flow: Before borrowing the money, take a look at your business plan. Check you have the proper measures in place to ensure you can pay it back. Look at your potential earning ability and how that matches up with your loan repayments.
  3. Be prepared for interest: If you are taking out a loan without collateral, then you have to be prepared to pay higher interest on that loan. This needs to be factored into your cash flow. It is also important to look at any fees involved. One of the biggest mistakes people make when taking out a loan is to not underestimate the costs involved.
  4. Wait it out: While you may be wanting a loan to get your business started, it is often better to get the business up and running before applying for the loan. This gives you the opportunity to show the lender a record of revenue. Consequently showing why you are a good risk to take.
  5. Do your research: Don’t just go with the first lender that says yes. Shop around and make sure you are getting the best deal possible for your business. The qualifying factors for non-traditional lenders will vary significantly. Therefore, it helps to look around at what these are before applying.

The best tip is to make sure you are prepared. Have your business plan ready. Be aware of exactly why you are taking out and loan and what you plan on spending the money on. This will give you more direction when it comes to applying for a loan. It will also help you to work out the costs involved versus the benefit to you and your business.

loan without collateral

Taking Out A Business Loan

Can you get a small business loan without collateral? Yes. If you are ready to take out this type of loan then be sure to speak to an expert before going ahead. Banks are unlikely to approve an application without having assets to secure their finance against. Therefore, your best bet is likely to be a private lender. The team at the Australian Lending Centre can offer the best advice about which loan will work for your needs and everything else you need to know before applying.

For more information on business loans, commercial finance, debt consolidation, bad credit business loans and low-doc business loans talk to our experienced and understanding loan specialists to see how our business loans can support your business goals.

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