Unsecured start-up loans are a great way for new businesses to get the money they need without having to put down any collateral or use a cosigner. Typically an unsecured start-up loan is for those new business owners with great credit history and rating. Banks want to know that the money they are lending out will be repaid regardless of the end results of the business itself. With new businesses having such a high failure rate for the first 5 years it is risky for a lender to offer an unsecured start up loan.
How to get an unsecured start-up business loan
- Find a lender that offers this type of business financing
- Make sure your business meets the lender requirements
- Submit an application
- Negotiate the terms and conditions of the loan
- Sign the contract and set up a repayment schedule
What is an unsecured start-up loan?
An unsecured start-up loan is a loan that is offered to a new business owner by a bank or another type of lending institution. What makes this type of loan unsecured is that the lender does not require a down payment, collateral or a co-signer to secure the loan. The lender is putting its trust in the new business based on their credit rating and history. The borrowing business agrees to repay the loan with interest within a certain amount of time. With unsecured loans they typically have a higher interest rate than a secured start-up loan, starting around 6.95%. Every lender’s rates, terms, and conditions vary so it is important for a business owner to ‘shop around’ before going with a certain loan.
Common benefits to unsecured start-up loans
- No collateral needed
- No cosigner needed
- No down payment
- Low monthly payments
- Moderate interest rate
Terms and conditions
The terms and conditions of most loans vary, the lender determines the terms and conditions by the borrower’s credit history and rating as well as their lending institutions guidelines. The borrowing businesses agree to pay the borrowed money to the lender with a predetermined interest rate. The borrowing business is not required to put up any collateral, down payment or cosigner to secure the loan. Also known as an unsecured business loan. The lender allows the borrowing business a predetermined amount of time to repay the loan. Failure to repay the loan will result in legal actions by the lending institution to retrieve the money borrowed.
Chris Fuller went to the University of South Florida and has worked in the financial sector for over 20 years. He has extensive experience in all aspects of personal and small business lending, from personal loans, equipment finance to cash flow based solutions for small mom and pop businesses, and large corporations.