Unsecured Business Loans
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Unsecured Business Loan FAQs
What is a unsecured business loan
The definition of an unsecured loan is a loan given only on the strength of a borrower’s credit and cashflow, and is not backed up by any specific assets. These loans can be attractive for businesses that don’t have much to offer in the way of collateral, although the interest rates are usually higher than secured loans to make up for the increased risk the lenders take on without collateral.
Do I need collateral for unsecured business loans?
One of the best things about an unsecured loan is that it does not require collateral. Unsecured loans do require a personal guarantee, and they are typically awarded to those with above average or good credit.
This type of loan can also help a young business build credit, which is why many pursue an unsecured business line of credit for a startup.
Because there is no collateral required, business owners who want an unsecured line should be prepared to supply business and personal tax returns, this helps AMP determine whether or not their loan is in good hands.
How can I use unsecured business loan?
This gives business owners the freedom to spend on what really matters the most.
A smaller company can keep the power to make its own decisions. The only real restrictions are that an unsecured line of credit should not be used for gambling, purchasing securities, or participating in anything illegal.
Small businesses often use unsecured loans to take care of their payroll when they are experiencing a slow month or season. A startup might use unsecured funds to get a new office and computers, buy materials, or launch a new product.
Even more mature businesses may need a loan to renovate their store or expand to a new area.
Can I get an unsecured business loan with bad credit?
It is difficult to get an unsecured loan with bad credit because there is no collateral, and the loan is awarded only on the strength of the borrower’s credit history.
Contact us to find out more about our minimum requirements and strategies to help you qualify.
Do I qualify for an unsecured business loan?
The most important way to qualify for an unsecured business loan is to have a strong credit score. A history of on-time payments and strong credit profile demonstrate financial responsibility, and will help you receive a better loan.
Most businesses that qualify for unsecured loans have been active for two or more years, and have a FICO credit score of 630 or more. This above average credit rating should be supported by financial documents such as the following:
- Business and personal tax returns
- An aging accounts receivable report
- Any other financials requested by the lender
If a business has ever filed for bankruptcy, it can still qualify. All bankruptcies must be completely satisfied and discharged for a minimum of two years, and all tax liens must be on active payment plans.
How much do unsecured business loans cost?
A small business with a good credit score and high profit margins will likely qualify for low rates. These rates may be higher if a business does not have a good credit score or high profits, because the additional cost adds a level of security for the lender. Use AMP Advance’s credit calculator to get an idea of what to expect from your rate.