Deciding to run your business solo is a bold and unconventional move. It can be incredibly freeing and satisfying to control your enterprise without anyone or anything holding you back. However, working outside the box can make it challenging to access business funding when traditional lenders measure your worth in physical assets.
If your work model is a little unconventional, your financing might need to be, too. Consider no-collateral business loans. Fintech companies and online lenders design these financing options specifically for entrepreneurs building businesses on strong cash flow, rather than physical assets. Wondering where, when, and how to secure unsecured loans for solopreneurs and service providers? We can help.
When Does It Make Sense to Choose an Unsecured Loan?
Alternative lenders and funding companies recognize that it doesn’t always make sense to tie your value to physical assets. They offer unsecured loans based on your creditworthiness, time in operation, cash flow, and business performance. It’s a financial solution that makes sense in several situations.
You Don’t Have Collateral
Solopreneurs and service providers, like consultants, designers, real estate agents, therapists, and bookkeepers, build their businesses around their time, expertise, or intellectual property. So they often lack tangible assets to offer as security. An unsecured loan provides these business owners with access to capital to expand their team or invest in marketing.
You Want to Protect Your Assets
If you run a service-based business, such as landscaping or pet grooming, your equipment and tools are the core of your enterprise. You can’t risk losing those key assets by putting them up as collateral for a loan. An unsecured loan enables your business to remain nimble and protects your assets while providing the funds needed to manage uneven cash flow or prepare for seasonal demand.
You Need Funds Fast
Speed can be critical when you’re operating independently. You don’t have time for a lengthy application and underwriting process. Luckily, many no-collateral loans offer fast approval and funding timelines. Lenders can use AI to evaluate your real-time business finances quickly and with minimal paperwork, so you can access the capital you need to seize an opportunity or pay for an emergency expense.
What No-Collateral Business Loan Options Are Available?
Lenders offer a variety of unsecured financing solutions. Each option fits different business needs and risk tolerances, so evaluate the loans based on your revenue structure and repayment capacity.
Working Capital Loans
Unsecured, short-term loans are fast to fund and best suited for one-time investments, such as covering operating expenses or taking on a new client project. You receive a lump sum, often within a few days. Then you repay the borrowed capital, plus interest, in regular monthly payments.
Lenders typically set repayment terms for working capital loans between six months and two years. They evaluate your monthly revenue and business history before funding your loan, but they can provide amounts of up to several hundred thousand dollars.
Business Lines of Credit
When you secure a business line of credit, you qualify for a maximum limit that you can draw on whenever you need. You only pay interest on what you use, and your repayments increase the available funds on revolving products.
Lenders often issue credit lines based on FICO scores and business financials. It’s an unsecured financial cushion for managing seasonal dips, surprise expenses, or short-term opportunities.
Merchant Cash Advances (MCAs)
If your business earns steady revenue through credit card or online payments, consider a merchant cash advance (MCA) as a speedy, unsecured option. You receive an advance on your future card sales and then repay the loan from a percentage of your daily or weekly transactions. This structure means that your payments fluctuate with your revenue.
MCAs are ideal for one-time investments in short term growth projects, like a marketing campaign or restocking inventory before the busy season. Businesses that need speed and flexibility can strategically use cash advances to grow their enterprises.
Invoice Financing
While you don’t need to pledge physical assets to qualify for invoice financing, it is a secured loan. You are borrowing against your receivables, rather than a vehicle or machine. Lenders advance a portion of an unpaid invoice to you upfront. Then, when the client pays, you repay the borrowed funds and a fee to the lender.
It’s an ideal option for solopreneurs to smooth out cash flow gaps between services provided and incoming payments. For example, therapists may not receive payment until a month or more after the insurance company processes the bill. Invoice financing gives entrepreneurs in healthcare access to working capital without disrupting their cash flow, making it a top loan for small medical businesses.
Equipment Financing
If you need capital to purchase physical assets, you can use an equipment loan or lease. Equipment financing is self-collateralizing, meaning the assets you buy secure the loan. You can typically qualify based solely on your credit and revenue history. Repayment terms are often long and reflect the usable lifespan of business equipment. If you plan to upgrade soon, you may opt for equipment leasing instead.
Which Lenders Offer Unsecured Financing?
You’ll find that many online lenders design loan products with small business owners in mind. They offer fast decisions and clear terms on a variety of unsecured options. Each of the following lenders focuses on performance-based underwriting rather than collateral.
Cardiff
Cardiff’s range of no-collateral small business loans includes working capital loans, merchant cash advances, revolving lines of credit, invoice financing, and equipment financing.1 They make financing accessible for small businesses across industries and growth stages by evaluating overall financial health and customizing loan terms to meet the borrower’s needs.
BlueVine
This fintech lender integrates business financing, checking, and accounting services into a single platform, providing you with control over your cash flow. BlueVine offers revolving business lines of credit and unsecured short-term loans.2
Fundbox
Fundbox’s unsecured financing products include revolving lines of credit, invoice financing, and term loans.3 They provide rapid access to capital by leveraging machine learning in their underwriting process.
OnDeck
Designed for simplicity, OnDeck offers funds through its term loans and lines of credit.4 They require one year in operations, $100,000 in annual revenue, and a better than 625 credit score to qualify.
American Express Business Blueprint
American Express offers lines of credit for up to $250,000 as part of its Business Blueprint platform.5 Anyone can apply, but solopreneurs who use AMEX business cards or checking accounts access higher funding amounts, exclusive repayment structures, and customized cash flow insights.
What Should You Do Before Signing?
Because lenders assume more risk for loans without collateral, unsecured financing comes with different terms than traditional funding. Some loans may come with higher interest rates, smaller loan amounts, shorter terms, and more frequent repayment schedules. As long as you balance the terms with your financial situation, a no-collateral loan will still provide valuable access to speedy capital.
Before you sign:
- Review the Annual Percentage Rate (APR) and total repayment costs.
- Weigh how payment frequency aligns with your cash flow.
- Check for early payoff penalties or missed payment fees.
- Consider how the repayment schedule aligns with your investment.
- Compare costs and terms across other products and lenders.
Taking these five actions before signing a financing agreement will ensure your unsecured loan supports your growth.
Free to Grow Your Business
You chose freedom for yourself when you decided to run your enterprise independently. But going solo doesn’t guarantee you’ll have enough funds to take your business wherever you want. Using unsecured business loans unlocks the capital you need without putting your valuable operations at risk. It’s funding unrestrained by collateral, so you are free to grow your business your way.
1https://cardiff.co/
2https://www.bluevine.com/business-loans
3https://fundbox.com/partners/
4https://www.ondeck.com/
5https://www.americanexpress.com/en-us/business/blueprint/business-line-of-credit/