Can I Get A Business Loan Without Collateral?

The simple answer? Yes. You absolutely can. Business loans are no longer something to be deemed as unattainable for the majority – or just for businesses that have huge profit margins and large assets to secure the loan against.

Whilst the number of commercial loan opportunities is guaranteed to shrink the moment you state the loan needs to be unsecured, that certainly does not equate to ruling out the potential to find additional funding altogether.

It is unlikely that your high street bank will approve a business loan application without collateral, but there are other ways to secure funding for your business.

Alternative lenders are the first place to start looking. In recent years, the number of businesses who have managed to obtain external finance has increased massively and that is due to the availability of business loans through alternative lenders.

Your business can access various loans through alternative lenders and some of those options will not have the requirement of providing collateral, though they may still ask for a personal guarantee.

One of the biggest contenders when it comes to unsecured loans is Cash Flow Finance. With this lending product, your SME will not be required to provide collateral and this is as straightforward and hassle-free as commercial loans come.

With terms ranging between three months and five years, your business will have plenty of time to pay back the loan amount with steady, pre-agreed monthly repayments. That means no nasty surprises, no huge bullet payment once the term has finished and peace of mind that your loan facility is completely under control.

A Business Cash Advance, also sometimes referred to as Merchant Cash Advance, is one approach a business can take in an effort to access working capital.

This is a relatively new product in the alternative finance landscape but it has taken the corporate world by storm as it has enabled so many businesses, both big and small, to access the funds they need without having to provide huge amounts of collateral.

To access this product, your business will need to take card payments. So, if you are able to use your card terminal as a means to secure the lending, there is no need to provide other assets, such as residential or commercial portfolios.

This type of alternative finance product is fantastic for businesses that do a lot of, if not all of their business through card transactions every month.

With a Business Cash Advance (BCA), the lender will agree on a split percentage with you – that is, the percentage to be repaid each day from your customer’s daily card transactions.

For that reason, a BCA is an entirely flexible funding option as there is no fixed borrowing term in place. Your business will not be expected to pay back a rigid monthly amount but will instead only repay what it can afford.

If your business struggles to maintain a healthy cash flow due to seasonality and the subsequent quiet months that follow, a BCA could be the answer to your cash flow challenges. Before providing the funding, Nucleus take into consideration both the busy and quiet months of your business so that your SME is only borrowing what it can comfortably afford to pay back.

With our BCA facility, we can provide funding between £3k and £150k and businesses we work with can borrow up to 125% of their monthly card volumes.

Invoice Finance is another viable option for businesses who are not fortunate enough to have the large assets needed to their name to access standard loans. Whilst this type of lending is considered to be a secured facility, it is different from a typical secured loan.

What is Invoice Finance and how does it work? Whereas with a traditional secured loan, your business will need to provide collateral, such as property, stock or machinery, Invoice Finance works by providing funding against the debtor book of your SME.

Essentially, your business has already made the money required to pay back the loan, meaning the loan is entirely based on the invoices you already have. Because the unpaid invoices are an asset themselves, there is usually no need to provide additional collateral.

It is worth remembering that unsecured loans do tend to be more expensive in nature. Due to the absence of assets used as security, small business loans without the need for collateral come with higher interest rates when compared to secured lending.

But for businesses that don’t have property or other assets to use as leverage, an unsecured loan is sometimes the only available route to explore. With so many funding sources available to businesses in today’s world, there is no reason why your SME should struggle through financially difficult months.

Maintaining healthy cash flow should be the number one priority of your company and with an ample amount of business loans available, it is definitely a priority within arms length.

For more SME advice and tips, read our related posts below. If you are experiencing cash flow challenges or want to realise your business growth plans, get in touch with our team of Funding Specialists today on 020 8038 6458 or email [email protected].