An unsecured small business loan is a loan that requires no collateral but is based solely upon the creditworthiness of the small business borrower. A signature loan would be an excellent example of what has traditionally been considered an unsecured loan. The vast majority of banks prefer to secure loans with some collateral like real estate, equipment, or another valuable business asset.

  1. An unsecured online business loan usually takes less time to apply: Online lenders have almost become synonymous with quick approval times—sometimes just a few minutes. And, once approved you can have the funds available in your account as quickly as 24 to 48 hours. So if you’re looking for capital to take advantage of a business opportunity that requires you to act fast, it could be a good fit for your business.

  2. An unsecured loan is not dependent upon the value of the collateral: When applying for a traditional secured loan, the formula for determining the loan amount is calculated based upon a percentage of the specific asset being used as collateral. In some cases, you may even qualify for more money with an unsecured loan—because the lender is making loan decisions about you and your business based upon the health of your business, your cash flow, and your personal and business credit profile.

  3. An unsecured loan can help build your business credit: If your lender reports your payment history to the appropriate business credit bureaus—unlike using your personal credit cards or another financing that doesn’t report to the bureaus—your timely payments will help you build (or strengthen) your business credit profile. This is important enough that you should ask about it before you sign on the dotted line.

  4. An unsecured line of credit could also be an option: If you’d prefer a line of credit, some lenders also offer an unsecured line of credit to be used as needed, repaid, and used again. And, you only pay interest on the amount of credit you use—not any of the available lines you don’t use.

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