How To Get an Unsecured Business Loan

What Is an Unsecured Business Loan?

Unsecured loans — also known as uncollateralized loans — let you borrow capital without collateral. Unsecured business loans have two key advantages over secured business loans. First, with an unsecured business loan, a lender can't seize your business assets if you fail to pay back the loan. Second, you can get funded faster.

How Do Unsecured Business Loans Work?

Unsecured business loans let you borrow money without pledging business assets or personal property as collateral. Instead, lenders evaluate your creditworthiness based on factors like your credit score, cash flow, time in business, and monthly revenue. If approved, your loan offer will include key details like the interest rate, repayment terms, and any applicable fees, such as an origination fee charged by the lender for processing your loan.

Because there's no collateral backing the loan, lenders take on more risk, so they offset that risk in other ways:

• Stricter eligibility requirements. You'll typically need stronger revenue or credit history to qualify.

• Higher interest rates. Rates are often higher than those on secured loans because there's no asset to recover in case of default.

• Shorter repayment terms. Most unsecured loans come with terms ranging from 3 to 24 months.

• Personal guarantees. Many lenders require the borrower to personally guarantee the loan, meaning you're responsible for repayment even if the business can't pay.

Unsecured loans are a popular choice for working capital, inventory purchases, and covering short-term expenses, especially when speed and flexibility matter more than securing the lowest possible rate.

Categories of Unsecured Business Loans

There are different types of unsecured business loans, which is a good thing — one financing option may offer a better solution for your business needs than another. Here are a few unsecured business loans to consider.

Whether you need a short-term loan, line of credit, or merchant cash advance, unsecured loans offer flexible credit products that don't require collateral, making them a good fit for many small business owners.

1. Unsecured Short-Term Loans

Best loan for: Business owners who need fast funding with minimal documentation.

For many, traditional business loans refer to unsecured short-term loans, which are the simplest form of financing to understand.

With a short-term loan, you can get a lump sum of cash at a fixed rate without collateral. You pay back the money in set monthly payments based on the specific life of the loan, usually up to two years.

At Clarify Capital, we've streamlined our online application to get you approved within minutes. Interest rates start at 7% for credit scores over 550.

These are the key benefits of unsecured short-term loans:

• Any type of business can get approved

• No collateral requirements

• Competitive interest rates offered by over 75 lenders

• Highest approval ratio

• Early payoff incentives

Apply for a Term Loan

2. Unsecured Business Line of Credit

Best loan for: Entrepreneurs who need a revolving credit line without collateral.

A business line of credit is a form of revolving credit. It's similar to a business credit card in that you can draw funds from your credit line when business expenses arise. You're only charged interest on those withdrawn funds. This condition makes a revolving business line of credit a great loan option to cover day-to-day working capital.

Lenders typically offer unsecured credit lines with lower loan amounts and shorter term lengths compared to their secured alternatives. However, it's still a great financing option for business owners looking to borrow capital with flexible repayment terms.

These are the key benefits of unsecured business lines of credit:

• No prepayment penalties

• Lower interest rates than credit cards (starting at 6%)

• Helps increase your personal credit rating

• Funds are available for use on demand

Apply for a Line of Credit

3. Unsecured Invoice Financing

Best loan for: Business owners who want to get paid for outstanding accounts receivable.

Also known as factoring, invoice financing lets borrowers sell their outstanding invoices and get paid in advance. The invoices themselves are collateral, so you don't need to risk any assets.

You get between 85% and 100% of the invoice value upfront. When the invoices come due, the factoring company collects from your customers. Then they take their fee and pay you any remaining balance.

This type of loan is one of the few options where your personal credit score isn't one of the main criteria in the approval process. Lenders focus more on your customer's creditworthiness, making invoice factoring a good funding option for owners with bad credit.

Here are the key benefits of unsecured invoice financing:

• No personal credit score requirement

• Get instant cash flow without taking on new business debt

• Quick approvals

• Your unpaid invoices act as collateral

Apply for Invoice Financing

4. Merchant Cash Advance

Best loan for: Entrepreneurs who need a lump sum of cash in exchange for a percentage of future sales.

A merchant cash advance (MCA) is a financing solution based on your creditworthiness, past sales, and future sales. You receive a lump sum loan that you repay daily or weekly through a portion of your future sales. It's a loan option that can help business owners bridge cash flow gaps and deal with unexpected expenses.

• Discover How To Choose a Merchant Cash Advance Direct Lender in 2025

An MCA covers your immediate needs for cash but won't leave you taking on more debt. The loan payment schedule is flexible, as you only pay as much as your sales. That's why retail businesses and restaurants are a good fit for merchant cash advances due to the seasonality of the industry.

• Learn the True Cost of a Merchant Cash Advance

Here are the key benefits of a merchant cash advance:

• Personal credit score isn't a factor

• Easy approval process

• You're borrowing against future credit card transactions

• No collateral needed

• Flexible payment terms

Apply for an MCA Loan

How To Apply for an Unsecured Business Loan

Getting access to capital is a common need for business survival and growth. As a business owner, you wear multiple hats, and your to-do list is long. You don't have the time to spend researching lenders and going to the bank to apply for loans, especially if you don't have many assets to act as collateral or a personal guarantee.

That's why our application process at Clarify is quick and easy. Filling out the online form takes just minutes, and then we do the work to get your business approved and funded in as little as 24 hours.

Here's a complete look at how our simple lending process works:

1. Determine How Much You Need To Borrow

Applying for a loan without knowing how much you need and what you need the money for can put your business in a difficult situation when it's time to pay it back. It's good to go in knowing how much you need and how much you can afford to borrow.

If you're using the money for working capital, list the business expenses you expect to pay soon. These expenses may include office rent, employee salaries and wages, and inventory.

If you're using the capital to fund business expansion, jot down all expenses you may incur and add at least 10% for contingency. Crunching the numbers will give you a reliable estimate of how much capital you really need.

2. Create a Business Plan

While many unsecured business loan providers don't require a formal business plan, having one can strengthen your application, especially if you have a limited credit history.

A business plan is especially helpful if:

• You're applying for a higher loan amount

• Your personal credit score is on the lower side

• You're seeking business financing for a new product, expansion, or major capital expense

Including a clear plan helps lenders understand your business model, how you'll use the working capital, and how you expect to generate the revenue to repay the loan. It builds confidence in your creditworthiness, even when you're not offering collateral.

3. Gather the Necessary Documents

After we review your application, we'll match you with a dedicated advisor who will answer any questions you may have and help you choose the best loan option based on your personal financial needs.

To make the process quick and easy, we suggest keeping the following documents handy:

• Legal identification documents, such as a driver's license, employer identification number (EIN), and Social Security number (SSN)

• Personal and business bank statements from the last three to six months

• Personal and business tax returns from the last two to three years

• Business financial statements, such as balance sheets and income statements

Lenders don't just look at your personal or business credit score — they evaluate several factors when reviewing your loan application. Here's what most online lenders and financing providers consider when assessing your eligibility for an unsecured business loan:

4. Apply Online

At Clarify, we take ease of funding and quick approval times seriously. That's why our application process takes three quick steps.

Fill out our online application — it takes two minutes — or call and speak to a Clarify advisor.

5. Get Funded

Depending on the loan amount and eligibility requirements you're able to present when applying for a loan, you may be able to get approved within one business day. Once you're approved, the money is wired to your bank account (either business checking account or savings) in as little as 24 hours!

How To Qualify With a Low Credit Score

If your credit score isn't perfect, you can still qualify for an unsecured business loan, especially with alternative lenders who take a more holistic view of your financial picture. Here are ways to improve your approval odds:

• Show consistent revenue. Lenders prioritize stable cash flow. If your business brings in $10,000+ per month, that's often more important than a high credit score.

• Highlight business performance. Documentation like bank statements, profit/loss summaries, or POS reports to show financial stability and growth trends.

• Build a short-term plan. Even if not required, having a simple plan for how you'll use and repay the loan helps show you're prepared.

• Consider a co-signer. If your credit score is below 550, having someone with stronger credit vouch for the loan can improve your chances, and may even help lower your rate.

Clarify works with over 75 lenders, so even if you've been turned down before, we'll help you find the best available option for your situation.

Why Choose Clarify Capital To Get an Unsecured Business Loan?

At Clarify, we believe every business owner deserves fast, reliable access to capital. Our streamlined application process makes it easy to secure funding without the hassle. We offer no-collateral business loans with competitive APRs—so you can focus on growth, not paperwork.

Here are just a few ways Clarify is changing the business lending industry:

• Easy application. Time is your biggest asset. We make the funding process as friction-free as possible with our three-step online application. It takes just a couple of minutes to complete, and you get a dedicated Clarify advisor to help you make an informed decision.

• Highest approval rates. We believe you are more than just your credit score. That's why we help you get the funding you need in as little time as possible. No more waiting weeks to get a decision from a traditional bank.

• Term length up to two years. Unsecured business loans with Clarify have term lengths between six months and two years. We also use favorable loan terms to tailor the repayment plan to fit your cash flow and business needs.

• No lengthy paperwork. When you work with Clarify, one application gets you access to a marketplace of more than 75 online lenders. This method takes far less time and effort than researching and applying to lenders one at a time. Less paperwork and faster funding are what we do.

• No collateral requirement. An unsecured business loan is an excellent option if you're a new business with limited assets to use as collateral. Unsecured loans also lower the risk of your assets being seized in case your business can't pay the loan.

• No hidden fees. Expect transparency when you work with Clarify. We keep the terms simple and straightforward — no hidden fees or vague terms you can't understand. Plus, your dedicated advisor will walk you through all available options, rates, and term lengths so you know what you're getting into.

• Competitive interest rates. As the largest marketplace for unsecured business loans, we offer competitive interest rates and terms. Our core mission at Clarify has always been to help small business owners like you achieve success in all their endeavors.

• Tax deductible. During the tax season, the Internal Revenue Service (IRS) allows you to deduct the interest paid on your business loans. This deduction helps lower your overall borrowing cost.

Apply for a No-Collateral Loan

How Fintech Lenders Are Reshaping Unsecured Business Loans

The rise of fintech lenders has made unsecured business loans more accessible than ever. Unlike traditional banks, which often require extensive documentation and collateral, fintech lenders streamline the process by using technology-driven underwriting models.

Here's how fintech lenders are revolutionizing business financing:

• Faster approval times. Automated risk assessments allow some lenders to approve loans within minutes and disburse funds the same day.

• Flexible requirements. Rather than focusing solely on good credit scores, fintech lenders consider factors like cash flow, revenue trends, and digital payment history.

• Alternative funding options. Many fintech lenders offer invoice factoring, merchant cash advances, and revenue-based financing, providing businesses with more tailored funding solutions.

As digital banking and AI-driven underwriting continue to evolve, unsecured loans will become even more accessible to startups and small business owners who need quick, flexible financing solutions.

Ways Fintech Lenders Are Using Data To Offer Smarter Loans

Modern fintech lenders are going beyond traditional credit scores. Many now analyze business performance data like POS transactions, accounting software activity, and digital banking behavior to assess creditworthiness.

This shift means businesses with strong operations, even without perfect personal credit, can still qualify for competitive financing. It's part of a broader move toward real-time underwriting, where up-to-date business metrics help lenders deliver faster, more accurate loan decisions.

At Clarify, we partner with tech-forward lenders who look at the whole picture, not just your credit report, to match you with smart funding options.

Ways To Use an Unsecured Business Loan

Most business owners use short-term loans, lines of credit, invoice factoring, and merchant cash advances (MCAs) as working capital. Flexibility in terms of use is one of the advantages of unsecured financing.

Here are the most common ways entrepreneurs use unsecured loans:

• Inventory purchases. Inventory is the biggest expense for many businesses, and it's the reason why most small business owners take out loans. It's especially true in industries like retail and restaurants, where keeping inventory stocked is key to success, especially for peak seasons with higher product demands.

• Equipment purchases. Regardless of size, many businesses need equipment to operate and produce products. Equipment needs vary from vehicles to heavy machinery to technology. When they're not buying equipment, businesses also use loans to pay for the repair and maintenance of equipment.

• Getting operational cash flow. Managing cash flow is one of the most challenging aspects of running a business. Cash flow gaps can happen for many reasons, such as delayed customer payments or emergencies. In the event of cash flow gaps, entrepreneurs rely on small business loans to handle day-to-day expenses without worrying about hitting the credit limit on a high-interest credit card.

• Refinancing debt. Refinancing existing debt is another way business owners use unsecured loans. Often, borrowers consolidate their debt to lower their monthly payments or receive additional funds.

• Hiring employees. At times, companies need to hire new staff to grow their business. When growth opportunities are available, an unsecured business loan allows you to expand your team. The funding lets you pay salaries and employee training.

Here are some more examples of what you can use unsecured financing for:

• Store renovations and improvements

• Acquiring another business

• Paying taxes and payroll expenses

• Digital marketing and advertising

• Paying for emergency repairs

• Opening a new location

• Buying or renting real estate

• Purchasing materials in bulk

• Covering unanticipated business expenses

• Exploring growth opportunities

Secured vs. Unsecured Business Loans: Key Differences

When choosing business financing, it's important to understand the differences between secured and unsecured loans. While both provide access to capital, they vary in approval requirements, risk, and repayment terms.

Secured loans require collateral, such as real estate, equipment, or business assets, which the lender can seize if the loan is not repaid. Because they pose less risk to lenders, secured loans typically offer lower interest rates and longer repayment terms.

Unsecured loans, on the other hand, do not require collateral. Instead, lenders assess the borrower's credit score, business revenue, and cash flow to determine approval. These loans tend to have higher interest rates and shorter repayment terms due to the increased risk for lenders.

When To Choose an Unsecured vs. Secured Business Loan

Unsecured loans make sense when:

• You need fast funding without lengthy approval processes

• You don't have valuable assets to pledge as collateral

• You prefer a loan option that doesn't put business or personal assets at risk

Secured loans are a better fit when:

• You have strong collateral and want lower interest rates

• You need a larger loan amount with longer repayment terms

• You want to build business credit with a traditional lending product

Both types of loans serve different business needs, and choosing the right one depends on your risk tolerance, financial stability, and urgency for funding.

When Is an Unsecured Loan the Wrong Fit?

An unsecured business loan can be a great solution, but it's not ideal for every situation. In some cases, a secured loan or even a different type of financing may better match your long-term goals or your current eligibility.

Consider other options if:

• You're purchasing real estate or high-value equipment where the asset can serve as collateral

• You're looking for lower interest rates and can provide business assets to reduce the lender's risk

• You want extended repayment terms beyond 24 months

In these scenarios, an SBA loan (from the Small Business Administration), a traditional term loan, or a secured line of credit may offer better rates, larger loan amounts, or more manageable monthly payments. Clarify Capital can help you compare both secured and unsecured business loans to find the right match for your business needs.

Pros and Cons of Unsecured Business Loans

The benefits of unsecured business loans are:

• No collateral is required. You don't have to put business or personal assets at risk to secure funding.

• Faster approval process. Many lenders offer same-day or next-day funding since there's no need for collateral evaluation.

• More accessible for small businesses. Businesses without valuable assets can still qualify.

• Flexible use of funds. Funds can be used for working capital, inventory, payroll, or unexpected expenses.

• Builds business credit. Responsible repayment can improve your business credit profile and eligibility for future financing.

These are the potential downsides:

• Higher interest rates. Lenders charge more to offset the higher risk of not having collateral.

• Shorter repayment terms. Most unsecured loans have repayment periods of three to 24 months, which can strain cash flow.

• Lower loan amounts. Loan limits are typically lower than secured loans, making them less ideal for large capital investments.

• May require a personal guarantee. Some lenders still require a personal guarantee, making the borrower personally liable for repayment.

• Stricter credit requirements. While collateral isn't needed, lenders may place more emphasis on credit score and your annual revenue when determining eligibility.

Important Considerations With Unsecured Loans

Unsecured loans offer fast, flexible funding, but it's important to understand the full picture before accepting an offer. Here are a few things to keep in mind:

• Factor rates vs. APR. Some lenders advertise loans using a factor rate, which can seem lower but often results in a higher total repayment. Always ask for the APR so you can accurately compare options.

• Repayment frequency. Some loans require daily or weekly payments. This isn't necessarily a drawback, but it's worth making sure your cash flow can support it.

• Transparency matters. Watch for hidden fees, unclear terms, or vague repayment schedules. Clarify is committed to upfront, borrower-friendly terms, and we'll walk you through every detail before you sign.

By working with a trusted marketplace like Clarify, you can avoid predatory lending practices and feel confident that you're getting a fair, flexible deal.

How Interest Rates Are Calculated: APR vs. Factor Rate

Not all lenders calculate interest the same way, especially when it comes to unsecured financing. Here's a quick breakdown of two common rate types:

• APR (annual percentage rate) includes interest and fees, giving you a true view of your total borrowing cost. This is the most transparent way to compare loans.

• Factor rate is a multiplier (e.g., 1.3) applied to your loan amount. A $10,000 loan with a 1.3 factor rate means you repay $13,000, no matter how quickly you pay it off.

Why it matters: A low-sounding factor rate may actually be more expensive than a higher APR, especially on short-term loans. Always ask lenders to disclose the APR, even if they initially quote a factor rate.

Who Should Get an Unsecured Business Loan?

Unsecured business loans are best for owners who need fast, flexible funding and don't want to put business or personal assets at risk. If any of the situations below sound like yours, this type of financing may be a strong fit:

• You don't have collateral. Your business is asset-light, or you'd rather not pledge property to secure a loan.

• You need funding quickly. You have an urgent expense and can't wait weeks for a traditional loan decision.

• You have solid revenue but limited credit. A consistent $10,000+ in monthly income can outweigh a lower credit score with many lenders.

• You're a newer business. Startups and businesses under two years old often find unsecured options more accessible than bank loans.

• You want shorter terms. You're looking to borrow a modest amount and repay it in under two years.

If your top priority is speed and simplicity, not the lowest possible rate, an unsecured loan can help you move fast without tying up your business assets.

FAQs About Unsecured Business Loans

Here are our answers to common questions asked by business owners looking to get a loan without collateral.

Get an Unsecured Business Loan Today

Need funding without putting your assets on the line? Clarify Capital offers unsecured business loans tailored to your needs — from short-term working capital to merchant cash advances.

Our streamlined application process gets you approved in as little as 24 hours. Use the funds for inventory, equipment, expansion, or everyday operations — no collateral, no hassle.

With a dedicated financing advisor by your side, you'll receive expert guidance on choosing the best loan option for your business's growth.