Unsecured business funding is real. There are 4 products that do not require pledged collateral. The catch nobody mentions: almost all of them still require a personal guarantee, which is a different question and a real one. Here is the honest cut.
"No collateral" vs "no personal guarantee" are two different things
Unsecured means no specific asset is pledged as collateral. The funder cannot seize a piece of equipment, a property, or your inventory if you default. Personal guarantee (PG) is separate: it means you as the owner agree to repay the debt personally if the business cannot. Most unsecured business funding still requires a PG. So the marketing line "no collateral required" is technically true while leaving out that you are still personally on the hook.
The 4 unsecured business funding products
Merchant Cash Advance (MCA)
Most accessible unsecured product. Underwrites on bank deposits, not personal credit alone. PG required. UCC filing on future receivables. Full MCA page.
Business Line of Credit
Cheapest unsecured option for owners who qualify. Revolving access, pay interest only on drawn balance. PG almost always required. Full LOC page.
Business Term Loan (alt funder)
Fixed monthly payment, fixed term. Most alternative-funder term loans are unsecured up to $250K. Bank term loans usually require collateral above $100K. Full term loan page.
Revenue-Based Financing (RBF)
MCA cousin with longer terms (12-36 months) and lower factor rates. PG required at most levels, occasionally waived for $1M+ revenue companies. Repayment scales with revenue.
What "unsecured" actually means in default
Without specific collateral the funder cannot seize a particular asset. But they have other tools:
- UCC-1 filing against your business receivables. This is not collateral on a specific item; it is a blanket security interest in your accounts receivable. If you default, the funder can notify your customers to pay them instead of you.
- Personal guarantee enforcement. The funder can sue you personally in civil court for the unpaid balance. Judgments are then enforceable against your personal assets (home equity, personal accounts, wages in non-protected states).
- Confession of judgment (COJ) in MCA contracts. Many MCA contracts include a clause where you pre-agree to a judgment in the funder's home state (often New York). This shortcuts the normal lawsuit process and lets the funder obtain enforcement quickly.
- Credit reporting. Default reports to business credit bureaus (D&B, Experian Business) and, through the PG, to personal credit bureaus.
None of this is intended to scare anyone off; unsecured funding works when used appropriately. It's intended to debunk the "no consequences" framing that some marketers use. Read what happens if you can't pay your MCA for the full default mechanics.
When unsecured is the right call
- You don't have collateral to pledge. Pre-revenue, service businesses, online businesses, professional services. No real estate, no equipment, no inventory to pledge anyway.
- The use of funds doesn't justify collateralization. Marketing campaign, payroll bridge, inventory load (where the inventory turns in 30-60 days). Tying up collateral for a 30-day need is inefficient.
- You want speed. Unsecured products typically fund 2-3x faster than secured equivalents because there is no collateral appraisal, title work, or filing perfection delay.
- The amount is under $250K. Most unsecured products top out around this level. Above $250K, you usually get better terms by using collateral (equipment, real estate, or SBA structure).
When secured is actually better
- You are buying equipment. Equipment financing uses the equipment itself as collateral, which lowers rate by 5-15 percentage points vs unsecured. The equipment was always going to be tied to the deal anyway.
- You need $500K+ for an acquisition or expansion. SBA 7(a) and 504 are technically secured (PG + UCC + sometimes real estate), but the rate (10-13% APR) is dramatically lower than unsecured options at this size. See MCA vs SBA.
- You have real estate equity available. A home equity line of credit (HELOC) for business use, when used carefully, runs 8-12% APR vs 30%+ for unsecured business credit. Only consider if the business use has clear ROI.
How to position an unsecured application strongly
Without collateral, funders weight everything else more heavily. Three things move the offer:
1. Clean bank statements
90+ days of consistent revenue, deposit count above 5/month, zero NSFs, average daily balance above $2K. This is what the funder uses instead of an asset appraisal.
2. Personal credit cleanup
Pay down revolving credit utilization below 30% before applying. This often moves FICO 15-30 points in 30 days, which can move you from 590 (MCA-only) to 620+ (LOC and term loan available).
3. Honest debt disclosure
Disclose existing MCAs and term loans upfront. Funders will find them anyway via bank statement review and UCC searches. Hidden debt discovered at underwriting kills offers and gets you flagged.
What is the difference between a secured and an unsecured business loan?
A secured business loan is backed by a specific asset the funder can take if you default — property, equipment, vehicles or receivables. An unsecured one is not tied to a named asset. That is the whole distinction. Unsecured does not mean risk-free for you, because almost every unsecured product still carries a personal guarantee.
The trade-off is predictable. Pledging an asset lowers the funder's risk, which generally means larger amounts and longer terms are available; declining to pledge one means the funder is relying on your revenue and track record instead, which usually means smaller amounts, shorter terms and a faster decision. Neither is inherently better. The right question is which risk you would rather carry.
Federal Reserve survey data shows how common each arrangement is in practice: among small employer firms holding debt, 59 percent used a personal guarantee to secure it, while 51 percent pledged business assets. Personal guarantees are the more common security, which is exactly why the guarantee question matters more to most owners than the collateral question.
How do you get a small business loan without collateral?
Apply on the strength of your revenue rather than your balance sheet. Funders offering unsecured products underwrite consistent deposits, time in business and account conduct, so the practical steps are to gather three to six months of business bank statements, clean up overdrafts and negative days, and be able to explain any unusual month before you are asked.
Expect the paperwork to be lighter and the scrutiny of your bank account to be heavier. Because there is no asset to fall back on, the statements are the underwriting. Consistent deposits matter more than large ones, and a stable balance matters more than a high one. Existing debt is checked carefully too — undisclosed advances found during underwriting will end an application quickly, so disclose what you already have.
Where you apply shapes the outcome as much as how you apply. The Broker Shop is a funding broker, not a funder, so one application is put in front of more than 50 competing lenders whose unsecured guidelines differ widely. It is free to apply, and checking your options won't affect your credit score.
Are there grants for small businesses that don't require collateral?
Grants never require collateral, because a grant is not borrowed money and there is nothing to secure. Genuine small business grants exist at federal, state and local level, but they are narrow, competitive and usually tied to a specific purpose, industry or eligibility category rather than being available to any business that needs cash.
Start at the official sources rather than with anyone who contacts you. Federal opportunities are listed on Grants.gov, and the SBA publishes which of its programmes are grants and which are loans. Treat any offer that asks for an upfront fee to secure a grant, or that promises you are certain to receive one, as a scam — legitimate grant programmes do not work that way. For most operating businesses, grants are worth checking but rarely worth waiting on, because the timelines run in months.
Frequently asked questions
See what you qualify for
One 2-minute application is matched to the funders whose guidelines you meet. It's free, and checking your options won't affect your credit score.
See What I Qualify For →Sources: Federal Reserve Banks — 2026 Report on Employer Firms, Small Business Credit Survey