Let’s start with this: your neighborhood bank is good for a few things. For example, if you’re looking to buy some mutual funds or temporarily park some cash in one of those oddly-named “high interest savings accounts,” then they’ll be happy to help. In fact, you may even get a free fridge magnet, calendar and cup of coffee. What’s not to like?
However, when it comes to the thorny issue of how to get a business loan with no collateral, then things typically get a lot less friendly. In fact, you won’t even make it past the application stage (let alone get a free coffee). What’s the problem here?
Banks have always been risk averse (read: they hate risk), but ever since the traumatic Great Recession that erupted in late 2007, they’ve taken their risk avoidance and aversion to a whole new level. And that means trying to get business loan without collateral is simply a non-starter. It doesn’t matter how loyal of a customer you’ve been, how many accounts you’ve opened over the years, or how many bank calendars have adorned your home or office. Banks insist on collateral because they want to make double (make that triple) sure that if you can’t fulfill your repayment obligations, they won’t absorb the loss: you will.
And so, if you don’t have enough collateral to secure a loan, or if you don’t want to pledge your business and/or personal assets, what can you do? Well, as we’ve highlighted previously, you may be able to get some cash by getting a car title loan. However, since you likely need more than a few thousand dollars, this probably isn’t a viable option. Fortunately, there is another route: head to the alternative lending marketplace (or rather, surf to it through your web browser) and apply for an unsecured working capital loan.
As the term suggests, an unsecured working capital loan isn’t backed by pledged business or personal assets. What’s more, unlike some other types of financing options (such as purchase order financing), you’ll get 100% of the agreed upon loan amount. Plus, if you find yourself in the fortunate position of being able to pay your loan back early to save interest costs, you can do so without incurring penalties.
Of course, all of this begs the question: why don’t more business owners take advantage of unsecured working capital loans? As strange as it sounds, the biggest reason is lack of awareness. Banks have been around for centuries, while the alternative lending marketplace is more recent, and only really started to attract attention in the aftermath of the Great Recession.
But as awareness spreads, more business owners will become aware – just as you are now – that, yes, you CAN get a business loan without collateral. And more than that, it may indeed be a smarter, safer and more strategic way for you to obtain business financing.
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