There are two types of fast business loans, unsecured and secured. Unsecured options may tempt you to take advantage of fast business financing options that don’t require the risk of putting up collateral. While there are indeed many great fast business loans available to the average business owner, there are several things you need to look out for.
On the one hand, fast business loans unsecured by any assets offer you an option when cash flow problems or major expenses arise. There are several benefits to consider if you need funds quickly but don’t want to risk your property with collateral. However, there are also warnings that you must consider if you want to get one of these loans.
Quickly Shop & Compare with the fastest unsecured business lenders:
| Lender | Minimum Revenue | Time in Business | Minimum Credit | Next Steps |
|---|---|---|---|---|
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$10,000/mo | 1 year | n/a | See if you qualify |
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$15,000/mo | 6 months | n/a | See if you qualify |
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$100,000/yr | 1 year | 500+ | See if you qualify |
Pros: Fast Business Loans, Unsecured
The first and most significant benefit is skipping out on the unneeded risk of collateral that comes with many business loans. Taking out a loan with interest or factoring is already enough of a risk. Why add your own property to the list of risks you’re already taking?
Second, speed is an a very valuable asset when it comes to business loans. Many business expenses cannot be delayed if you want to stay in business for long. When any sudden disaster strikes, you will want a way out. Waiting weeks for a bank to respond to your initial application won’t cut it in many cases. If you don’t have enough saved up, fast business loans may be the only available answer. However, you can’t let that rush cloud your judgement.
Cons: Common Problems & Traps
Business lenders that are open to the public, licensed, and accredited cannot lie to you or steal. However, they can set up traps that can catch you unaware. Sneaky terms and fees are applied by some lenders to squeeze more money out of you.
Here are the things you need to know when searching for business loans.
High Rates
Fast business loans unsecured by assets look great from any borrower’s perspective. But from the lender’s point of view, they just mean more risk. In the lending business, more risk always means higher rates.
Pay attention to the APRs on any fast unsecured business loans you are looking into. High APRs are the result of high interest rates, which can ruin a business that allows itself to fall into an interest-fueled debt cycle.
Fees for Fast Business Loans Unsecured by Assets
Look closely at any fees that come with fast unsecured business loans. Remember, lenders can make up for their increased risk in more ways than just interest. Application fees, origination fees, prepayment fees, and other fees can often be quite high. They can add up and cost you quite a bit, so look for these fees in the terms of any loans you are looking at.
Misleading Labels
Many lenders, especially the most modern kinds, will have different labels and branding. That can be a great, honest thing for a business lender to do. After all, the modern business ecosystem is quite diverse and many businesses can benefit from highly specialized financing. The problem is that some fast unsecured business lenders advertise themselves as one type of lender, but their terms suggest that they are something else entirely.
The devil is always in the details. Learn how all the major categories of business loans work. Then, if you see any inconsistencies in a lender’s offer, you will be able to catch it before you make a mistake.
Not sure if you qualify? Try these marketplace lenders:
| Lender | Minimum Revenue | Time in Business | Minimum Credit | Next Steps |
|---|---|---|---|---|
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$100K/year | 1 year | 600+ | See if you qualify |
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$10,000/mo | 3 mo. | n/a | See if you qualify |
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$10,000/mo | 3 mo. | n/a | See if you qualify |
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$75,000/yr | 24 mo. | 620+ | Request Intro |
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Varies | Varies | 560+ | See if you qualify |
“Interest-Only” Payments
Some lenders will subtly lead you to believe that you only need to pay interest on your loans for a specified amount of time. Make sure you look closely at the terms to determine the exact timeframe of the interest-only period. Be suspicious of interest-only offers.
Cash Flow of Fast Business Loan Unsecured by Collateral
One of the biggest and most common mistakes borrowers make is not properly accounting for how a loan will affect their cash flow. This is a particularly common problem when it comes to merchant cash advances. Regardless of the financing option you choose, make sure you find out how much and how often you will need to pay the lender back.
What You Can Do
The common thread connecting the drawbacks of business loans is a lack of awareness. The first thing you should do is do your research into any business lending company you come across. If a lender is sneaky, dishonest, or in any way unscrupulous, you can find out about it easily online. Refer to trusted platforms like the Better Business Bureau and see what customers are saying.
Always stay on top of your numbers. It is up to you to make sure you’re not throwing your business into a debt crisis. This is true no matter what kind of business loan you get and where you get it from. It also includes the consideration of any applicable fees that come with a business loan.
Fast unsecured business loans serve their intended purpose when they are used as intended. Unfortunately, not all business lenders are honest, but you can find honest fast business lenders just as easily as you can find the bad ones.
