How to Secure a Business Loan Without Providing Collateral
Unsecured debt is one of the most inconvenient kinds to carry if you’re watching your credit report, because it can lower your score quickly if the balance goes too high. At the same time, though, providing collateral for a loan means risking an asset, and you don’t always want that. Sometimes, you want the hedge of secured debt without the risk that would come from refinancing infrastructure equipment or your facilities.
The solution is to get a loan based on one of your company’s less than physical assets. You can access cash advances and credit options that cost you less than a hard money loan or unsecured credit line would if you shop smart for your financing, and you can use assets like your invoices, inventory, or even your merchant account to get the short-term funding you need. Typically, financing based on those assets can be used as working capital, so you can spend it on new equipment, labor, debt consolidation, or inventory buy-ups at your discretion, among other things.
This is the best solution to avoid putting up collateral, and which solution you use is going to be based on your needs, your business model, and the financial health of your company. Asset-based financing is a complex form of credit that uses more than one of these assets to create a credit line you can access at will. The balance available will move along with the value of your inventory and invoices, so as your business expands, your available credit will expand with it.
If you’re not ready for a product that complex yet, you can try out factoring for fast money and predictable fees you can start to price into your quotes to customers. For companies that make a lot of sales via credit card, a merchant cash advance could be the loan source that fits best. They are repaid out of your credit receipts each month, and the more profits you make off your use of the capital, the faster they get repaid. There’s also inventory financing for companies that carry a lot of warehouse goods, and more new forms of alternative lending are being developed every day.
If you are looking for the best fit for your business, you may have to try out a couple products before you find one that works. The best way to get good information about your options is to talk to a lender that provides a variety of these services. Often, they can review your business’s operational model with you and then suggest options they’ve tailored to companies like yours. Get the financing you need without collateral today.