Unsecured Business Loans
OnDeck offers funding with no specific collateral required.
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What is an unsecured business loan?
An unsecured business loan is simply a loan from a lender that doesn’t require any form of collateral from a business or a business owner. The decision is based solely upon the creditworthiness of the applicant. Because the lender has nothing to secure the loan with, the cost of unsecured business financing is generally more than secured business financing. Other than financing through business credit cards and certain types of revolving credit lines, it’s common for business lenders to claim some type of security or personal guarantee.
That said, many healthy and thriving businesses don’t have specific collateral — such as equipment, real estate, inventory or other tangible assets — to qualify for a traditional business loan. Fortunately, there are lenders that do not require their loan options to be secured with specific collateral. Some lenders will require a general lien on the business’s assets rather than specific collateral.
Types of Unsecured Business Loans
Term Loan
A business term loan is one of the most straightforward types of unsecured business financing. It provides a lump sum of capital that can be repaid over a specific period, usually with a fixed rate and regular monthly payments. Because it doesn’t require collateral, approval is often based on your credit score, business history and revenue. Term loans are ideal for businesses looking to finance a large purchase, expand operations or cover long-term investments with predictable repayment terms.
Merchant Cash Advance (MCA)
A merchant cash advance isn't technically a loan but an upfront lump sum of money in exchange for a percentage of your future credit card sales. It’s an unsecured financing option that’s popular with businesses that have strong daily sales but may not qualify for traditional funding. Repayments are made automatically through a percentage of daily or weekly revenue, making MCAs accessible but often more expensive due to higher fees and factor rates.
Line of Credit
An unsecured business line of credit offers flexible access to funds up to a predetermined limit, allowing you to draw what you need, when you need it.◊ You only pay interest on the amount you use, making it a cost-effective option for managing cash flow, covering short-term expenses, or handling emergencies. Since it's revolving credit, the funds replenish as you repay. This allows small business owners ongoing access without the need to reapply.
Invoice Factoring
Invoice factoring allows you to convert unpaid customer invoices into immediate working capital. With this unsecured financing option, a factoring company purchases your outstanding invoices at a discount and collects payment directly from your customers. This is especially useful for businesses with long payment cycles or clients that take 30 to 90 days to pay. It improves cash flow quickly without taking on debt or needing collateral.
Is funding from OnDeck unsecured?
OnDeck offers two types of business funding. One is unsecured, and the other is secured but does not require any specific collateral. Rather than the value of collateral, we make lending decisions based on aspects like cash flow and credit history. This makes it possible for healthy businesses to obtain business funding, even if they don’t have specific assets that can be used as collateral.
OnDeck Line of Credit
An unsecured revolving credit line you can draw from 24/7 to receive funds within seconds.*
- Credit limits from $6K - $200K
- Flexible repayment terms of 12, 18 or 24 months
- Great for keeping funds on hand
OnDeck Term Loan
A lump sum of cash secured with a general lien on the business (no specific collateral or lien on personal assets).
- Loan amounts from $5K - $250K
- Repayment terms up to 24 months
- Great for larger investments in your business
Secured Business Loans vs. Unsecured Business Loans
| Feature | Secured Business Loans | Unsecured Business Loans |
|---|---|---|
| Typical Amounts | Can approve for more. May range from $50K - $5M. | Typically smaller amounts. Many range from $10K - $50K. |
| Rates & Terms | Typically lower rates and longer terms (e.g. up to 25 years). | Typically higher rates and shorter terms (e.g. less than five years). |
| Speed of Funding | Longer application and underwriting process while assessing value of collateral. | Shorter application process with underwriting based on creditworthiness. |
| Requirements | Collateral is required in addition to strong credit profile. | No collateral required; bank statements and credit history are important. |
How does OnDeck's unsecured business line of credit work?
If approved for an OnDeck Line of Credit, you’ll receive a revolving credit line from which you can draw up to a specific amount. When you take a draw, you’ll receive the funds straight to your business checking account. You then have a set time period to repay the funds — 12, 18 or 24 months.
You make payments on a weekly or monthly basis to pay off what you’ve borrowed by the end of the term. Interest accrues daily on the borrowed amount, so the quicker you pay back your borrowed funds, the less interest you’ll pay. Any amount that you haven’t drawn — and any amount you’ve paid back — can be kept as an interest-free safety net for emergency situations.
OnDeck’s Minimum Requirements**
1 Year
in business
Business
checking account
$100K
business annual revenue
625
personal FICO® score
FAQs: Unsecured Business Loans
A small business loan can be either secured or unsecured, depending on the lender and the type of financing. Secured loans may require specific collateral — such as equipment, inventory or real estate — to back the loan, which reduces risk for the lender. Unsecured business loans, or loans secured by the general assets of the business, on the other hand, do not require any collateral and are typically granted based on the borrower’s creditworthiness, business revenue and financial history.
To get an unsecured business loan, start by researching lenders that offer this type of financing — such as online lenders, alternative financing companies, or some banks and credit unions. You’ll typically need to provide documentation like bank statements, tax returns and a business plan. Lenders will evaluate your credit score, business performance and time in operation to determine eligibility. A strong financial profile increases your chances of approval without the need for collateral.
The main difference between secured and unsecured business loans is whether or not collateral is required. A secured loan is backed by business assets that the lender may be able to seize if you fail to repay, which usually results in lower interest rates and higher borrowing limits. An unsecured loan doesn’t require collateral but typically comes with higher interest rates and stricter eligibility criteria. Both types of loans have their advantages depending on your business needs and risk tolerance.
Most lenders prefer a personal credit score of at least 650 for unsecured business loans, though some alternative lenders may accept scores as low as 600. A good credit score improves your chances of approval and may help you qualify for better terms, including lower interest rates and higher loan amounts. Keep in mind that eligibility requirements such as business revenue and time in business can also play a significant role in the credit approval and underwriting process. For new businesses or those with limited credit history, unsecured small business loans may be difficult to obtain.
If you default on an unsecured business loan, the lender cannot seize specific collateral, but that doesn’t mean there are no consequences. Lenders can take legal action to recover the debt, which could result in wage garnishment, a court judgment or damage to your personal and business credit scores. In some cases, lenders may have required a personal guarantee, meaning you’re personally responsible for repaying the debt even if the business fails. You’ll want to make sure you read all disclosures before signing your contract.
Some SBA loans do require collateral, but not all of them. For example, SBA 7(a) loans over $50,000 generally require the lender to secure available collateral. However, the Small Business Administration does not automatically decline applications based solely on a lack of collateral. Instead, SBA lenders focus on the business’s ability to repay, its cash flow and the creditworthiness of the borrower. Smaller SBA loan programs, like the SBA Microloan, may not require collateral at all.