Unsecured Small Business Loans for Startups From $50,000 to $100,000

What can businesses use unsecured loans of $50,000 to $100,000 for?

Unsecured business loans of $50,000 to $100,000 can be used to do the following:

1. Start your business: Financing is one of the biggest challenges of starting a business. If you can’t self-fund the business or access investor capital to back your fledgling venture, you can use a loan of $50,000 to $100,000 to get operations off the ground.
2. Expand your business: Some businesses show early signs of success but need more money to grow. In these cases, a loan of $50,000 to $100,000 can help you buy the equipment or hire the people you need to open new locations or ramp up production. 
3. Improve your cash flow: If your business provides a service, there may be a delay between performing the service and receiving payment. A loan of $50,000 to $100,000  can help you through these periods.

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How do unsecured business loans work? 

To understand how unsecured business loans work, it’s important to note the difference between secured and unsecured loans: 

• Secured loans: With secured loans, lenders require loan applicants to provide collateral. Collateral can include extra money paid upfront or a lien on various business assets. A lien is a financial term for the assets the lender “holds” until the loan is repaid. Secured business loans minimize a lender’s risk but can limit small businesses’ flexibility and ability to secure additional loans.
• Unsecured loans: Lenders offer unsecured business loans as a financing option for startups and other small businesses that want a loan without collateral. These loans may have additional requirements and higher interest rates.

A small business’s unique financial situation will dictate whether an unsecured loan is the best funding solution. While not putting up collateral may seem like an attractive option, keep the following in mind when considering an unsecured business loan: 

• Unsecured business loans may require a personal guarantee: With unsecured business loans, lenders may not require collateral but may require a personal guarantee — a legally binding agreement with the lender that says you’ll repay the loan. The lender may also add other application requirements to approve the loan to protect their investment. 
• Unsecured business loans will likely have higher interest rates: Your unsecured loan’s interest rate can vary widely. However, while there’s no set interest rate for unsecured business loans, your rate will likely be higher than the interest rate for a secured bank loan. This is because, without collateral, the lender takes on more risk by accepting your loan. Higher interest rates go hand in hand with higher risk. There’s no such thing as an unsecured business loan with a low interest rate.

What are the types of unsecured loans?

Standard types of unsecured loans include the following: 

• Merchant cash advances (MCAs): MCAs are when a lender gives you a sum of money you’ll repay weekly or monthly from your credit card sales revenue. These loans are also called credit card receivables financing. Although these loans are technically unsecured, the lender does have direct access to your credit card sales. With this type of debt, your credit score is relatively unimportant. However, this funding option can be expensive. 
• Working capital loans: An unsecured working capital loan is a short-term term loan or line of credit. Other types of working capital loans, such as invoice factoring and equipment loans, are secured by the underlying asset. They tend to have a lower interest rate and more challenging application and approval processes because the lender considers your creditworthiness via your credit scores, debt-to-equity ratio and other criteria.
• Business lines of credit: A line of credit differs from a term loan because it allows you to borrow a portion of the amount, repay it and borrow against it again — similar to how a business credit card works. However, lines of credit usually have higher credit limits and lower interest rates than credit cards. Notably, lines of credit have a variable interest rate. If interest rates are rising, you may end up paying more interest than you bargained for when you first took out the line of credit, although the opposite is also true.

How can you get an unsecured business loan?

Several alternative lenders provide small businesses with unsecured loans, which are often short-term loans you’ll repay over a year. 

The process of obtaining an unsecured business loan typically involves reviewing a lender’s loan offerings and requirements and completing an online application. You’ll likely need to provide information about your business’s financial stability, so have essential documentation readily available, such as a government-issued photo ID, recent bank statements, credit card processing information and tax returns.

Lender requirements will vary. However, most will evaluate the following criteria.

1. Lenders will look at your credit score when you apply for an unsecured business loan.

The credit score you need to qualify for an unsecured business loan will vary by lender. Our comprehensive review of SBG Funding found that this lender accepts credit scores as low as 500. Many lenders advertise their flexibility in this category. Still, the tried-and-true rule is that the better your credit score, the more likely you will be approved. A credit score of around 700 is usually considered good, with 800 and up being the best.

2. Lenders will look at how long you’ve been in business when you apply for an unsecured business loan.

Alternative lenders are willing to take on more risk than traditional banks or credit unions, but you still must have an operational business. Many alternative lenders want reassurance that you can run a successful business, but requirements vary for how many years of business you need to have under your belt. 

For example, our review of Rapid Finance found that this lender requires applicants to have been in business for only three months. In contrast, our review of Biz2Credit revealed that this vendor requires loan applicants to have been in business for 18 months.

3. Lenders will have annual sales requirements for unsecured loans. 

Whether you want to borrow $50,000 or $100,000, lenders want to ensure your business has sales. You may not be profitable, but you must demonstrate that you have customers and revenue. To mitigate the risk of the business failing and the borrower defaulting on the business loan, lenders on unsecured loans require business owners to have a minimum amount of annual sales. 

Again, this amount varies by lender. Our review of Balboa Capital revealed relatively stringent requirements — businesses must have $300,000 in annual sales for some of its loan products. Our review of Accion found more relaxed requirements — only $50,000 in annual sales. 

Are unsecured loans safe?

While unsecured loans are safe, having a lawyer review your loan documents is a good idea. In some cases, a lender may have you sign a personal guarantee, making you and your business partners personally liable if your business defaults on the loan. Getting expert legal advice about your loan terms can help you protect your business and make the best financial decision. It can also help you understand the total cost of borrowing, including the interest rate and other fees. 

Lenders that provide unsecured loans

With good credit and a solid business plan, you have an excellent chance of finding an unsecured business loan of $50,000 or $100,000. Hundreds of lenders throughout the United States can provide these loans. We’ve highlighted several highly regarded lenders throughout this article. Here are two additional reputable companies to consider:

• Fora Financial: Fora Financial provides small businesses and startups with various unsecured small business loans. Its pricing model is unique in that it does not charge traditional interest rates. Instead, you borrow and pay back a fixed amount based on your business’s financial stability. Our review of Fora Financial explains how this lender does not charge additional fees or require collateral.
• Noble Funding: Noble Funding provides unsecured small business loans, cash advances and bridge loans. As noted in our review of Noble Funding, this lender doesn’t require collateral or a personal guarantee. Loan terms range from four to 18 months, with no upfront or closing fees.

Jennifer Dublino contributed to this article.