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Maintaining cash flow, managing employees, and covering bills can make running a small business challenging. Time can often be of the essence when you need to pay for these costs, making a fast business loan appealing.

Traditional loans may require extensive documentation, such as a business plan, years of bank statements, and proof of collateral to get funding. And in some cases, approval and accessing funds can take weeks or more.

A fast business loan, on the other hand, can sometimes be funded within 24 to 48 hours with less documentation than traditional business loans require.

Keep reading to learn more on fast business loans, including what they are, the different types of fast business loans, and how to find one.

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What Is a Fast Business Loan?

A fast business loan is a small business financing option designed to provide quick access to funds, often within 24 to 48 hours. While these loans offer quick approval and turnaround, this convenience may come with tradeoffs, such as higher interest rates and service fees.

Types of Fast Business Loans

How fast you can get your funds and the costs involved will depend on which type of small business loan you opt for. Here are some fast business loan options you may want to consider.

SBA Express Loans

The U.S. Small Business Administration (SBA) offers a variety of loan programs catering to different business types and funding needs. Although some SBA loans may involve a longer application process, if you’re after quick-funding business loans, the SBA Express program could be a solution. Eligible businesses may request up to $500,000 and receive approval from the SBA in as little as 36 hours after applying.

SBA Express loans are issued by a network of SBA-approved lenders. The SBA guarantees to fund up to 50% of the loan in the event that the borrower defaults. This reduces risk to the lender and allows them to offer more flexible qualification criteria.

Business Lines of Credit

Having cash on hand can be important for covering both day-to-day operations and emergency expenses. Instead of applying for financing whenever costs arise, a business line of credit allows you to access cash (up to an approved limit) whenever you need it.

Once approved by a lender, you are allocated a maximum credit line and can withdraw funds up to that threshold to pay your bills, purchase inventory, or fill in gaps for working capital. You only pay interest on the amount you borrow and, once you repay those funds, they are available to borrow again.

Equipment Financing

Equipment is integral to many businesses’ operations, whether it’s concrete mixers for a construction business or computers for an accounting firm. However, purchasing machinery and other vital equipment is often too costly for businesses to pay for out-of-pocket.

If this is your situation, equipment financing may be a route to consider. This type of small business loan may charge less interest than conventional options, since the equipment itself is typically used as a form of collateral. Repayment terms are determined by the individual lender but usually span a few years.

Getting an equipment loan is typically a faster process than obtaining traditional funding, though it can vary by lender.

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Short-Term Loans

A loan’s term is the amount of time it will take for the borrower to pay the loan off completely by making regular payments. For short-term business loans, this duration can range from a few months to up to 18 months.

Short-term business loans are often a faster route to cash than long-term financing options. Since the repayment terms are shorter, lenders usually view short-term business loans as less risky, making their requirements less stringent.

Easier qualification helps speed up the process so that businesses can act quickly to maintain cash flow, buy inventory, and address other unexpected costs.

Invoice Financing

Delays in payments from customers and clients can lead to cash flow issues. Those, in turn, can delay you when you need to act on investment and growth opportunities. Instead of standing by, many businesses can borrow against outstanding invoices owed to them through a practice called invoice financing.

With invoice financing, the lender loans you a large percentage of the face value of your unpaid invoices. As your customers settle their debts, you receive the rest of the invoice amount, minus the lender’s fees.

This quick funding option is typically better suited to businesses that sell wholesale or let customers buy goods or services on credit. Otherwise, they may not have enough invoices on hand to finance.

Merchant Cash Advance

A merchant cash advance (MCA) can be a solution for a business that needs capital immediately to cover cash flow shortages or short-term expenses. With an MCA, a financing company gives you an upfront sum of cash that you repay using a percentage of your debit and credit card sales, plus a fee. Often the way the financing is structured is that MCA provider automatically deducts a daily (or weekly) percentage of your debit and credit card sales until the advance is repaid in full.

This quick access to cash generally comes at high cost. MCA companies charge a factor rate plus fees. When the factor rate and fees are converted into an annual percentage rate (APR) and compared to other business financing options, MCAs tend to cost considerably more.

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Exploring Fast Business Loans

Fast business loans provide a convenient solution for businesses needing quick access to funds. While they offer rapid approval and flexible credit requirements, they often come with higher interest rates and shorter repayment terms. Careful consideration of costs and benefits is essential before opting for this financing option.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What is the fastest way to get a business loan?

The fastest way to get a business loan is through online lenders or alternative financing platforms. These lenders often offer streamlined applications and quick approval processes, sometimes within 24 to 48 hours. Options like business lines of credit, merchant cash advances, or SBA Express loans also provide faster access to funds.

Can I get a loan for a new business?

Yes, you can get a loan for a new business. Options include SBA loans, business credit cards, online lenders, and microloans. However, lenders often require a strong business plan, good personal credit, and sometimes collateral, as new businesses lack established revenue and financial history.

Do I need a good credit score to get a fast business loan?

Yes, a good credit score increases your chances of getting a fast business loan, as lenders use credit scores to assess risk. Many online lenders offer quick loans but may charge higher interest rates for lower credit scores. Strong credit helps secure better terms and faster approval.

Photo credit: iStock/gorodenkoff

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOSMB-Q424-060

As a small business owner, you rely on vendors for your materials, office supplies, and inventory, so vendor selection is an important decision. The vendors you choose to work with can determine how much you spend, the quality of the products you produce, the timeliness of your shipping, and, ultimately, the profitability of your business.

In this article, you’ll learn six criteria to keep in mind when you’re selecting vendors for your business needs.

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What Are Vendors?

Vendors are the businesses that sell what you need, whether that’s material to create your products or paper for your printer. You can only get so far with your new business ideas alone. You need help (and physical items) to make your ideas a profitable reality.

As you start a small business and research different vendors, it can be easy to become overwhelmed with all the options out there. Vendor selection should be a carefully-made decision to ensure you get exactly what you need at the best price. It can help to boil it down to specific criteria you want to look for.

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6 Criteria for Choosing Vendors

One of the best tips for starting a small business is to find vendors you like working with. They should be reliable, trustworthy, and affordable.

As you start the process of vendor selection, tune into what you’re looking for, since every vendor will provide something slightly different. One may offer the lowest price, but a less quality product. Another may offer great pricing and quality, but take longer to ship. It’s all a matter of where your particular priorities lie.

1. Your Needs

Start by identifying what you need. If you sell physical products, do you want to purchase them already made from a manufacturer or wholesaler, or do you plan to create the products yourself? In the case of a retail garment business, you would likely buy the clothing already made. But if you create custom bath bombs, you’ll need one or more suppliers to provide the raw materials, like bath salts, scents, and packaging.

It’s best to create a list of all the materials you will need, including ones to ship your product. From there, you can narrow down what you can get on your own and what you’ll need to use a vendor for.

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2. Quality

One of the most important supplier selection criteria is the quality of the products. You likely already know your target market and approximate product price point. This information can guide you to the level of quality you should seek from a vendor.

If you’re catering to the luxury market, you’ll want a vendor that can supply top-of-the-line materials or finished products. If, on the other end of the spectrum, you’re targeting the budget crowd, you’ll probably want to find the lowest price that still offers decent quality.

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3. Pricing

The more you pay per item, the lower your profit margin. Keep in mind that your product profit margin includes more than just what you pay for the materials or product — it also includes the labor it takes to create or package the product. You can always raise your prices to keep a good profit margin, but then you risk turning off potential customers if they can find a similar product for less elsewhere.

Some vendors may offer discounts if you buy in bulk. This could make sense if you know your sales volume and are confident that you can sell the products fast enough to cover that investment. What vendors charge can vary greatly, so shop around.

However, if you are making a high-end product, the quality of the item is likely quite important. You might need to pay more for supplies, even if that means taking out a small business loan to do so.

4. Speed of Delivery

You may find great prices from vendors located in, for example, China, but be sure to weigh all the criteria carefully. It may not do you any good to save on the products you buy if it takes months for the shipment to arrive.

Particularly if you need frequent deliveries or if you order fresh products (like food), it may be smart to work with a vendor in the area where your business is located to ensure that orders arrive on time and don’t jeopardize your business’s ability to sell.

5. Vendor Reputation

With so many options for vendor selection, you may be inclined to go with the cheapest and fastest option. However, it may be worth doing a little digging to see what people are saying about that vendor.

You can start with the Better Business Bureau, followed by a quick search for reviews for that company to show you what other people think about working with that particular vendor. If there are any instances of fraud or negative customer experiences, think twice before buying from that company. You don’t want your business funding to go towards a problematic vendor.

You might also consider reaching out to any business organizations you may belong to or other businesses similar to your own to see if they can make any referrals.

6. Minimum Order Requirements

Some vendors have what’s called minimum order quantities. This is simply a threshold requirement of how many units you must purchase for an order. Sometimes the number may be in the thousands of units.

This may or may not make sense for your business. If you sell, for example, thousands of bracelets online, buying thousands of jewelry clasps might not be a problem. If you sell only a handful each month, though, this probably won’t work.

You can always ask a vendor if it’s possible to negotiate that minimum order quantity. Sometimes you can do this and just pay more per unit. If not, keep looking.

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How to Find Vendors

First, consider what kind of vendor you need. If you’re looking to source materials or products, think about whether you would prefer to buy directly from the manufacturer or from a wholesaler.

A manufacturer may be a great option if you’re looking to customize your products. They may be cheaper to work with, but keep in mind they may be located overseas, which may be inconvenient.

A wholesaler buys from a manufacturer, which means that you may end up paying a little more if you use one. However, it may also be easier to work with a wholesaler and you may be able to find one located in the U.S., so you can get your items faster. Evaluate factors like net working capital and business timelines as you make these decisions.

When it comes to vendor selection, a good way to find quality vendors includes:

•  Referrals: If you’re involved in industry associations or online business groups, ask if anyone has a recommendation for whatever you’re trying to buy.

•  Industry trade shows: Here, you can meet with representatives face-to-face to learn about what each vendor can offer your company.

•  Online B2B marketplaces: Online marketplaces are where you can find anything and everything, from clothing to pet supplies. Minimum order quantities may vary.

•  Local vendors: When you’re looking for something simple, like office supplies, you might consider local vendors who can quickly deliver whatever you need.

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Choose Your Vendors Carefully

The key to vendor selection is to shop around. You may want to request samples or even make a few small test orders of the same items from different vendors. This will allow you to compare the quality of the goods and the experience of working with each vendor.

One tool you may want to use when you’re choosing among several vendors is a Request for Information (RFI). In an RFI, you ask a potential supplier for general information about the products and/or services you’re interested in. As the name suggests, this is simply a formal request for information, not a contract or an agreement. Ideally, you should try to construct your request so that it will be easy for you to compare the most important answers from your leading choices.

Finally, as you’re narrowing the field, don’t be shy about asking a prospective vendor for a discount. Your balance sheet may thank you. The vendor should want to earn your business and build a long-term relationship with your company. It may be able to lower what you pay if you plan to make repeat purchases.

If you’re planning to seek funding (perhaps via a personal business loan or other option), include your vendors under Key Partnerships in your business plan, since potential investors may want to see who you work with.

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The Takeaway

Making a careful selection among available vendors can be a time-consuming process, but taking the time and making the effort to find the right sources can ultimately benefit your business and your bottom line.

Just remember, vendor selection isn’t carved in stone. As your business grows, its needs may change. What’s more, whether it’s for inventory or for other reasons, you may reach a point at which you find your small business would benefit from a small business loan. In that case, SoFi’s marketplace can help. It’s fast and easy to shop, search, and compare your small business financing options.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What is vendor selection?

Vendor selection is the process in which a business owner determines their needs, what products and services they require to get their work done (such as supplies or accounting services), and which third parties they will partner with to satisfy their needs and requirements.

How do you select the right vendor for your business?

There are several key factors to selecting the right vendor for your business, including you needs and the vendor’s quality, pricing, delivery speed, reputation, and minimum order requirements.

What is the most important thing for vendor selection?

Vendor selection can involve understanding your needs and evaluating the vendor’s pricing, quality, delivery speed, reputation, and minimum order requirements. There is no single, one-size-fits-all most important factor. If you are making a budget-priced product, price may be of paramount importance. If you are creating a high-end item, however, you might decide that quality and reputation matter most.

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSMB-Q424-016

As a business owner, it’s important to stay on top of your finances, even if you have an accountant or bookkeeper overseeing your accounts. One way to get a quick overview of how well your company is doing is to review three key financial statements — the balance sheet, income statement, and cash flow statement.

These reports stand alone and also work together to give you a complete picture of your company’s financial position. Read on for an in-depth look at financial statements, from what they include to what they can tell you, plus some examples of business financial statements.

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What Are Financial Statements?

Business financial statements are documents that summarize the business activities and financial performance of a company.

There are many different types of financial statements, and each focuses on a different area of a company’s performance. For example:

•  The balance sheet provides an overview of assets, liabilities, and owner’s equity as a snapshot in time.

•  The income statement looks at revenues and expenses and gives you the company’s “bottom line” during a particular period.

•  The cash flow statement acts as a bridge between the income statement and balance sheet by showing how money moved in and out of the business.

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How Do Financial Statements Work?

Business financial statements are typically prepared by an accountant. However, with the help of small business accounting software, you may be able to prepare your own financial statements.

Once prepared, financial statements can be used both internally and externally. For example, you’ll need to provide financial statements if you apply for a small business loan. Investors also use financial statements to analyze the performance of a company, compare that performance to competitors or industry standards, and to make predictions about the future direction of the company.

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3 Key Financial Statements

Here’s a look at the three financial statements most commonly used by small businesses.

1. Balance Sheet

A business balance sheet lists your company’s assets and liabilities and shows your company’s net worth on a certain date. Because it’s called a “balance” sheet, assets must balance (a.k.a, equal) liabilities plus equity.

What It Includes

A balance sheet includes these three categories:

•  Assets: This lists what your business owns of value that can be converted into cash. It includes current assets (those that can easily be converted to cash within a year or less) and long-term assets (those that won’t be converted to cash within a year).

•  Liabilities: This is money that you owe to others, including your recurring expenses, loan repayments, and other forms of debt. Liabilities are broken down into current and long-term liabilities.

•  Shareholders’ equity: Also called owner’s equity (for sole proprietorships), this includes the amount of money generated by a business, the amount of money put into the business by its owners/shareholders, and any donated capital.

The balance sheet formula is:

Stakeholders’ Equity = Total Assets – Total Liabilities

What It Tells You

The balance sheet tells you your business’s worth at a given time, so you can better understand its financial position. It can be a good idea to update your balance sheet each month to keep close tabs on your business.

Example

Here’s an example of a fictional company’s balance sheet.

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2. Income Statement

A business income statement, also called a profit and loss (or P&L) statement, provides an overview of a company’s revenues, expenses, net income, and earnings per share for a certain period of time (such as a month, quarter, or year).

What It Includes

The income statement lists your total revenues, expenses (such as wages, rent, interest paid on debt, and utilities), gains (such as income from the sale of an asset), and losses (such as such as settlement of a lawsuit) to arrive at net income (revenues plus gains minus expenses plus losses).

What It Tells You

The income statement assesses a business’s profitability over a specified period. It can also tell you whether sales or revenue is increasing when compared over multiple periods.

Example

Here’s an example of a fictional company’s income statement.

3. Cash Flow Statement

A cash flow statement shows you how much cash is entering and leaving your business in a given period.

This statement is critical for a small business because it can show you that, while you might be very profitable on your income statement, you could have trouble paying your bills some months, based on when your customers pay you and when your bills are due.

What It Includes

The cash flow statement is divided into three segments:

•  Operations: This includes money earned from the products or services the company provides, as well as the money it spends to produce these products or services.

•  Investments: This includes the returns the company gets on money it has invested and the cash it spends to acquire and manage these investments.

•  Financing: This refers to the money the company has coming in from the debt it uses to finance its operations, as well as the cash it spends on this debt.

What It Tells You

The cash flow statement tells you exactly what you took in, and when you took it in, and what you paid, and when you paid it. It also shows what you’re going to have to pay on certain dates, or in certain months, and what you expect to take in during specific time periods.

This helps you determine if you may need to arrange for extra credit, apply for a loan, or otherwise bring in more revenues, possibly by asking your customers to pay their outstanding invoices.

Example

Here’s an example of a fictional company’s cash flow statement.

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Pros and Cons of Financial Statements

So should you bother with financial statements? Let’s look at the benefits and drawbacks of using them in your business.

Pros of Financial Statements

The biggest benefit of financial statements is that they help you keep your finger on the pulse of your company’s finances. They provide insight into:

•  How much and how your business generates revenues

•  What the cost of doing business is

•  How efficiently your business manages its cash

•  What your business’s assets and liabilities are

•  Whether your business has the capability to pay back its debts

These statements can help you make smart financial decisions like when to bring on investors or explore small business loan options.

And if you do decide to apply for a loan, the lender may want to see these financial statements to determine the risk level you present as a borrower.

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Cons of Financial Statements

Financial statements also have some drawbacks and limitations. Here are some to keep in mind.

•  They’re based on past data. Because financial statements are based on historical data, they don’t provide information on the company’s current situation.

•  Information may be biased. Financial statements aren’t completely scientific. Because some areas are open to interpretation, a business may be able to make their financial picture look better than it really is.

•  They don’t tell you everything. Financial statements only include aggregate information, so they don’t give you all the details. Plus, they only provide quantitative information. They don’t reveal any qualitative information, such as the company’s relations with its suppliers, behavior of top management, or morale of employees.

The Takeaway

These three main financial statements are useful tools for any business. The balance sheet looks at a firm’s financial health through its liquidity and solvency. The income statement reports a company’s profitability. And, the cash flow statement ties these two together by tracking sources and uses of cash.

Together, financial statements help you understand the financial health of your business and can guide you to making informed decisions for your company.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What do business financial statements contain?

Business financial statements include information about the company’s finances, such as revenues, expenses, shareholder equity, and cash flow.

How do you obtain financial statements for your business?

You can generate financial statements using accounting software, which compiles data from your daily financial transactions. If you work with an accountant or bookkeeper, they can prepare these statements as part of regular financial reporting. Either way, generating financial statements on a regularly basis can help you keep tabs on your business’s financial performance over time.

What are the three most important financial statements?

The three most important financial statements are the balance sheet, income statement, and cash flow statement. The balance sheet provides a snapshot of assets, liabilities, and equity. The income statement (also called the profit and loss statement) shows revenues and expenses, indicating profitability. The cash flow statement tracks cash movements, showing how cash is generated and used. Together, these statements can give you a complete picture of a business’s financial health and performance.

Photo credit: iStock/damircudic

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOSMB-Q424-057

When your small business takes out a loan, how does the lender know you’re going to pay it back? One way is by providing the lender with business collateral.

Collateral is an asset of value that, should you fail to repay the loan, the lender can seize (and sell) to recoup their losses. When you put up collateral, the bank or lender you’re working with sees you as less of a risk when it comes to paying back the loan.

Not all loans require collateral, however. Read on to learn why that is, what situations might require you to provide collateral, and how to get a small business loan without collateral, if you qualify.

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How Do Traditional Loans With Collateral Work?

No matter where you apply for a small business loan, the lender will look at how much risk you present.

One indicator of that level of risk is your credit score. If your business or personal scores are low, it indicates that you may not always have been financially responsible in the past. Maybe you’ve taken on more debt than you could afford, you’ve missed credit card payments, or you have a bankruptcy on your record. All of these may concern a lender, since it is primarily focused on the likelihood that you will repay the loan.

Because of that concern, some loans may be secured, meaning that they require collateral. Unsecured loans, by contrast, don’t require collateral. Collateral is typically an asset that you own. When you put it up as collateral, you are agreeing that the lender can seize it if you are unable to pay your loan. The lender can then sell this asset to cover what you owe.

Some examples of small business collateral includes:

•  Heavy machinery

•  Equipment

•  Real estate

•  Cash

•  Securities (e.g., treasury bonds, stocks, or certificates of deposit)

•  Inventory

•  Vehicle

So, let’s say that you’re applying for a $50,000 secured loan. You might put up a piece of heavy machinery you own as collateral for the loan. If you aren’t able to fully repay the loan, your lender has the right to seize that asset to cover the balance of what you owe.

Collateral is not a commitment to take lightly. Putting up collateral like critical equipment and real estate you’ve worked hard to get could jeopardize your business. That’s why you might want to learn how to get a small business loan without collateral when it’s possible so that you don’t put your business assets at risk.

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Do Small Business Loans Without Collateral Exist?

Yes, it’s possible to get a small business loan without collateral. But because the lender will face a higher risk when you don’t put up an asset to secure the loan, they will look closely at your credit scores, business history, and annual revenue to determine your creditworthiness and likelihood to repay the loan.

Also, because there is higher risk involved for the lender, loans without collateral often come with higher interest rates, shorter repayment terms, and sometimes a personal guarantee.

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Why Some Loans Require Collateral

A collateralized loan presents less risk for the lender, so it’s able to be competitive and possibly offer your business a lower rate.

Some lenders require collateral because they cater to people who might not qualify for other types of business financing. For businesses with poor or limited credit, an unsecured loan through a bank might not be an option, so they may need to go with lenders that have more requirements in terms of collateral.

There are also specific loan types that, by definition, require collateral, such as invoice financing and equipment loans. Invoice financing (and the related invoice factoring) uses the value of the business’s unpaid invoices as collateral, and equipment loans use the equipment you’re purchasing to secure the loan.

How Do Unsecured Business Loans Work?

If you don’t have collateral (or don’t want to put your business assets on the line), it may be possible to get an unsecured loan. In this case, the lender might use the following clauses to lessen the risk of lending you money.

Blanket Liens

As a condition of your unsecured loan, your lender may file a blanket UCC lien on your company assets. This means that, should your business default on the loan, the lender has the right to go after your assets to compensate for any amount still owed.
Thus, even if you don’t put up collateral, a blanket lien means the lender can seize assets. However, getting financing with a lien is generally a faster process than getting a secured loan.

Personal Guarantees

Without collateral, a lender may require you to sign a personal guarantee in order to get your business loan. This guarantee means that you agree to repay the loan out of your own pocket in the event that your business defaults on the loan. While you shouldn’t be afraid of signing a personal guarantee, it’s important to understand what it means before you commit to the loan.

Pros and Cons of Getting a Small Business Loan Without Collateral

Small business loans without collateral can have both benefits and drawbacks. Here’s a look at how they stack up.

Let’s dig a little deeper into the details.

Pros of Small Business Loans Without Collateral

There’s more paperwork involved with a loan that requires collateral, plus that asset must be assessed and valued. A small business loan without collateral would typically take less time to process and, as a result, could fund faster.

Because you aren’t putting up a key asset (such as your commercial real estate or equipment) for the loan, there’s no risk that you will jeopardize your business by allowing those assets to be seized if you can’t pay the loan. (Of course, you will still have to figure out a way to pay back the loan.)

If you choose to work with an online lender, you may have better success at getting a small business loan without collateral than if you apply with a traditional bank.

Cons of Small Business Loans Without Collateral

First, these loans tend to have higher interest rates, since they represent higher risk to the lender.

Also, the value of the collateral you put up often determines how much you’re eligible for. So without that collateral, you may not be eligible to borrow as much.

A loan with no collateral may require signing a personal guarantee or agreeing to a blanket lien, so you can still end up putting assets at risk.

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8 Types of Small Business Loans Without Collateral

Here’s a look at different types of small business financing that may not require collateral.

1. SBA loans

Small Business Administration (SBA) loans are often considered the gold standard for business loans because they typically offer the largest amounts and lowest rates. And, since these loans are backed by the government, they can be easier to qualify for than other types of business loans.

Some SBA loans require collateral, whereas others do not. It’s often left to the discretion of the SBA lender to determine whether collateral is required, based on the qualifications of the borrower. However, with the 7(a) program, no collateral is required for loans up to $50,000.

2. Long-Term Loans

Long-term business loans are lump sums of capital paid back over a set period of time — typically from three to 10 years. Banks and credit unions may choose to require collateral for long-term business loans at their discretion. With unsecured loans, however, you may need to provide a personal guarantee, which means that if your business can’t pay back the loan, you personally will have to.

3. Merchant Cash Advance

Another no-collateral business loan option is a merchant cash advance. With a merchant cash advance, you’re borrowing against future credit card sales. You pay back the advance (plus a fee) by having a certain portion of your daily or weekly debit and credit card sales automatically withdrawn from your business bank account.

4. Online Loans

If you get a business loan from an online lender, you may not need to supply collateral. Instead, an online lender might require a personal guarantee or, possibly, a blanket lien to reduce its risk. However, online business loans tend to charge higher interest rates and offer less favorable loan terms than traditional banks.

5. Business Credit Cards

While a business credit card is not exactly a loan, it can serve as a source of no-collateral funding for your business. This is especially true if you are able to get a 0% introductory annual percentage rate (APR) business card.

These intro deals often last as long as 12 to 18 months, which could allow you to charge expenses up front, then pay them off interest-free. Just keep in mind that, once the promotional period expires, you may end up paying high interest and fees.

6. Business Lines of Credit

While banks often require collateral for a business line of credit, you may be able to find an unsecured business line of credit from an online or alternative lender.

Secured or unsecured, a business line of credit can be a flexible source of funding for newer businesses with limited credit history. You can borrow what you need up to a certain limit. As you pay off the amount you owe, it’s freed up for you to use again when you need it.

7. Equipment Financing

Equipment financing can be helpful for new businesses that need funding to purchase expensive equipment but can’t (or don’t want to) use other assets for collateral. With an equipment loan, the item you are purchasing acts as collateral. If you default on your loan, the lender will simply seize the equipment to recoup their losses. Your personal and business assets stay safe.

8. Invoice Financing

Invoice financing (also known as accounts receivable financing) is a cash advance you can get on your outstanding customer invoices. With invoice financing, your invoices serve as collateral, so you don’t have to put any additional assets on the line.

With this type of financing, an invoice financing company advances you a certain percentage of your outstanding invoices. They hold onto the remaining percentage and charge fees for each week it takes for your customers to pay up. Once your customer has paid in full, you’ll get the reserve amount back, minus the lender’s fees.

How to Qualify for Business Loans Without Collateral

If you’d prefer to avoid the hassle of collateral — or don’t have enough assets to offer as collateral for the amount of money you need — you still have financing options.

You may be able to get an unsecured business loan from an alternative lender. These lenders may also offer a faster, larger loan than a traditional lender could offer with a secured loan. However, they tend to come with higher interest rates and shorter terms because they’re less secured.

To qualify for a business loan without collateral, focus on building a strong credit score, as lenders will heavily weigh your personal and business credit history. Make sure to demonstrate consistent cash flow and solid financial performance, as that shows your business can meet repayment obligations. And finally, prepare a comprehensive business plan that outlines your company’s growth potential, revenue projections, and loan usage, which can improve your credibility.

Recommended: 6 Step Guide to Getting a Small Business Loan

The Takeaway

To get a small business loan without collateral, apply for unsecured loans, such as business credit cards, lines of credit, or SBA microloans. Lenders may focus on your credit score, cash flow, and business performance. Building a strong business plan and financial history improves approval chances.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Do startup business loans with no collateral exist?

Yes. While most business loans will require collateral to secure the loan, there are some startup business financing options you may be able to get without collateral. These include some SBA loans, unsecured lines of credit, short-term loans from online lenders, merchant cash advances, and business credit cards.

What is collateral?

Collateral refers to an asset that you put up to secure a loan. Should you be unable to pay back your loan in full, the lender can take your collateral to cover the debt.

How do traditional secured loans work?

By providing an asset, you lower the amount of risk you present to the lender. The lender can take your collateral if you can’t pay the loan.

Can you get a small business loan without collateral?

Yes, there are business loans that do not require collateral. They’re called unsecured loans, and they typically require solid credit scores and annual revenues to qualify for the best rates.

How hard is it to get a loan without collateral?

It depends on your qualifications. If you have a solid business history, steady revenue, and good credit scores, you may qualify for an unsecured loan.

What kinds of loans can you get without collateral?

There are a variety of small business loans and lines of credit you can get that don’t require collateral. Such funding includes SBA loans, long-term loans, lines of credit, and merchant cash advances.

Photo credit: iStock/shapecharge

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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A business has its own credit report that reflects the risk profile of the company, similar to a personal credit score that is like a snapshot of your personal credit profile.

Your business credit score plays a crucial role when you want to expand your business, get loans, and qualify for competitive rates and terms. Lenders look to business credit scores to decide about loans. Suppliers and other businesses use it to evaluate whether or not they want to work with your business.

Before applying for any type of small business financing, it’s important to learn about your business credit score. Keep reading to learn how to check your business credit score and how to manage it to your best advantage.

💡 Recommended: Accounts Receivable Financing

Where to Check Your Business Credit Score

A business credit score turns the information on your report into a number that represents the “health” of your business. The scoring range is much different than what you see with your personal credit score. For example, FICO® scores range from 300 to 850.

There are three main sources for business credit scores: Dun & Bradstreet, Experian®, and Equifax®. FICO also produces a small business scoring system.

Experian

Experian’s business scoring models range from 1 to 100, with a higher score being the goal. Experian uses a variety of factors to determine a business score, such as a company’s outstanding balances, payment history, overall credit utilization, and trends over time.

Dun & Bradstreet

Dun & Bradstreet PAYDEX® uses a scale of 0 to 100, with a higher score being more favorable. On this scale, scores of 80 or above are generally considered to present the lowest risk to a lender.

Equifax

Equifax has a few different scoring models for businesses, including the Business Credit Risk Score™, Business Failure Score, and Payment Index. The Business Credit Risk Score indicates how likely it is that a company may incur a 90-day delinquency or charge off over the next year. This score is on a scale of 101-992, and higher scores are generally preferable to lenders.

The Business Failure Score ranges from 1,000 to 1,880 and is used to predict how likely a business is to file for bankruptcy in a 12-month period. The Payment Index is an indicator of a business’ past and current payment performance. Each report will also provide a suggested interpretation of the value.

FICO

FICO’s Small Business Scoring Service (SBSS) runs on a scale of 0 to 300, with a higher score being more favorable. This evaluates a number of individual factors and allows banks and lenders to pool the profiles of different businesses, business owners, and other relevant information from various financial institutions.

Recommended: Unsecured Business Line of Credit for Startups

Factors That Influence a Business’s Credit Scores

Payment history can have a major influence on your business credit score, since it shows lenders how likely you are to repay future balances. The length of your company’s credit history also plays a role, as does the amount of debt you currently carry. The type of industry you’re in and the size of your company also contribute to your business credit.

When you do a business credit score check, you’ll see quite a bit of information about your company. Items you’ll find include:

•  Ownership details

•  Company financials

•  Risk factors

•  Account history

•  Any liens, judgments, or bankruptcies

•  Uniform Commercial Code (UCC) filings

Businesses typically have a credit report as long as they’re registered properly. LLCs, and even sole proprietors, may be able to apply for small business loans based on their financial history.

Recommended: Guide to Business Loans for Bad Credit

How to Get Your Credit Score

When looking for your personal credit report, you’ll notice that there are three primary credit bureaus that lenders use to evaluate your score. Similarly, there are multiple companies you can use to access your business credit score, as well. Here’s an overview of the main ones.

Experian

The most basic credit score report costs $39.95 and includes a one-time report summary as well as your score. You can obtain either a one-time report and scores, or you can subscribe to ongoing monitoring. For ongoing access to both your reports and scores, it costs $199 a year.

Dun & Bradstreet

Dun & Bradstreet offers a free basic credit score monitoring service allowing you to view your scores, alerts, and inquiries. You can upgrade to paid monthly plans that come with a variety of benefits, such as more scores, detailed legal events, and dark web monitoring.

To get going, you will need a D-U-N-S Number, which is a nine-digit identifying number for your business. D&B may have already created one for your company, but if not, you can obtain one for free in up to 30 business days by going to D&B’s site. You may also pay a fee for an expedited number.

Equifax

You can get a business credit report from Equifax with prices starting at $39.95 for a single report and $199 per year for a basic subscription, and up. Depending on your choice,the information on the report might include such details as a credit summary of your business, public record, and payment trends. You may also see risk scores.

FICO

A business’ FICO® SBSS score indicates the creditworthiness of a business and is a metric often used by the Small Business Administration (SBA) when reviewing loan applications. Since the FICO SBSS score is aggregated from data collected from the other credit bureaus, it can be worth checking in on those credit reports for errors and inaccuracies.

Recommended: Accounts Receivable Financing

Why Your Business Credit Report Is Important

Your business credit report can play a large role in small business loan applications and other types of funding for a small business, which is why it’s important to pay attention and actively manage your score. Prioritizing your business credit score can help give you more options if you ever need to secure financing.

A strong credit score has the potential to help pave the way to more competitive business loan terms. Both credit card interest rates and loan interest rates can jump significantly if your business credit score flags your company as a greater risk. The amount you’re approved to borrow may also vary based on your business’ credit history.

Even if you don’t anticipate needing business financing in the near future, your company’s credit score can affect other areas of business, as well. Because business credit reports are public information, external third parties are allowed to access them without your permission. Vendors may access your credit profile to determine how quickly they should require payment. If they see that you have a strong history of paying loans and invoices on time, you may be granted a longer period of time. On the flip side, a less consistent payment history may cause you to receive a shorter window of time to pay vendor invoices.

A final important use of your business credit report is to ensure your company has not become a victim of a type of fraud. Identity theft issues you may discover on your credit report include new business lines of credit or credit cards that your company didn’t actually open. Keep an eye out for any charges or unknown accounts listed on your business credit report to keep your score accurate.

Recommended: Business Financial Statements

4 Common Strategies for Improving Your Business Credit Score

While bad credit business loans with no collateral and other options are available, they typically come with unfavorable terms, like high interest rates and frequent auto-draft payments. Working to build a better business credit score can potentially put you in a better position to qualify for more advantageous loan terms. And while there are a variety of factors that can affect your business credit score, and each bureau has different criteria, here are a few general tips.

Opening Accounts to Build Your Credit History

One way to start establishing a business credit history is to pay your business expenses with a commercial account — not a personal account. Business credit cards affect your credit score. It can also help to find out which of your vendors report to the agencies. For those that don’t report payments, you may be able to manually add them to increase the trade lines on your account.

Consistently Making Payments

Just as with your personal credit score, paying your bills on time has a large influence on your business credit score. Late payments are listed on your credit report and the scoring models use that data to determine how likely you are to pay future bills on time. If lenders see multiple late payments and delinquent accounts, they’ll likely be more hesitant to offer you financing.

💡 Recommended: Business Financial Statements

Checking Your Report for Accuracy

Make sure there aren’t any errors on your business credit report. One common mistake is finding information that actually belongs to another company. Also check to make sure the age of your business is correct, since a longer history can contribute to a better score. Finally, look for any red flags that might indicate identity theft, such as accounts in your business’s name that you never opened.

Lowering Your Credit Utilization

Another part of building your business credit is managing your debt well. Many lenders may view large loan balances as a sign of cash flow issues, so it may be wise to try to keep your credit utilization ratio as low as possible.

Ways to lower your business’s credit utilization ratio may include paying down balances or asking for higher credit limits from existing creditors — but not drawing on the funds. Just having that extra available credit can lower your credit utilization and may show that your business effectively manages cash flow and debt. Note that some bureaus’ formulas do not weigh credit utilization heavily.

Recommended: How Credit Utilization Impacts Your Credit Score

The Takeaway

Understanding your business credit score is a process that provides you with a wealth of information. The more you know about your company’s credit history, the more prepared you’ll likely be to apply for financing when you need it. Plus, you can actively work to build your business credit score, knowing which areas are important.

If you’re interested in exploring your small business loan options, SoFi’s marketplace can help.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

How does a business credit rating work?

A business credit rating is a score created for a business, not a person. Ratings are determined from the business credit report — including how many employees, age of business, payment history, and amount owed — and shared with those interested in checking out a business’s financial soundness. Potential lenders and partners use a credit rating to help decide if your business will be a good risk.

Who tracks business credit scores?

The major bureaus tracking business scores are Dun & Bradstreet, Equifax Business, Experian Business, and FICO.

Can you find your business credit score for free?

The Fair Credit Reporting Act, which gives you the right to free personal credit reports for major credit bureaus once a year, doesn’t give the same access to business credit. It’s difficult to get ongoing access to all your business credit reports for free, but you might get partial business credit information for free or do a one-time pull of a full report.

Photo credit: iStock/AzmanJaka

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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