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Unsecured Business Loans: Financing Without Collateral

When you apply for a secured business loan with a traditional bank, you’ll typically have to pledge something called “collateral” in order to be approved. Collateral is real estate, inventory, or another asset of value that the lender can seize to cover their losses if you default on their loan. However, pledging collateral isn’t always easy (or possible). If your company needs capital quickly and you’re not comfortable putting your possessions at risk, you may want to explore unsecured business loans.

Unsecured loans allow business owners to borrow money based on their creditworthiness and financial history alone. This structure opens the door for healthy companies that don’t have assets to pledge, which can be common among startups operating without a lot of physical infrastructure. However, while the underwriting process can be faster and easier, unsecured loans often come with higher interest rates and stricter requirements.

As you read this guide, you’ll learn how unsecured business loans work, the different types you can choose from, what lenders ask for, and how the application process typically unfolds. We’ll also take a look at Slash, a finance platform that offers working capital lines of credit with the help of their lending partner, Slope.¹, ⁵ Slash users can access funds with flexible 30, 60, or 90 day repayment terms without the need to pledge collateral.

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What is an Unsecured Business Loan?

An unsecured business loan is financing that doesn't require collateral. For a secured loan, the lender takes a lien on a specific asset that it can seize if the borrower defaults. These assets can be property, inventory, equipment, or anything that can act as backup value for the lender. An unsecured loan skips that step, as approval is based on the borrower's credit profile, revenue history, and overall financial health instead of pledged assets.

Lenders take on more risk when they hand over large amounts of money without collateral to back it up. For this reason, unsecured loans tend to carry higher interest rates than secured loans, and may be harder to get approved for. Many lenders also require a personal guarantee, which is a separate provision in the loan agreement where the business owner agrees to repay the loan personally if the business cannot. This personal guarantee acts kind of like its own collateral, except it’s your cash rather than your business’s assets.

Why Choose Unsecured Business Loans?

The main appeals of unsecured financing are accessibility and the protection of your assets. Without collateral to appraise, the application process is simpler and lenders can often release the money within a week. If your business lacks valuable physical assets and needs capital quickly, unsecured loans are often more accessible than secured alternatives. Given these advantages, they’re starting to become more popular among modern businesses. According to data from Secure Research, 42% of small businesses in 2025 sought loans from non-traditional banks, which is up from 25% in 2018.

All this said, these loans can come with tradeoffs. Interest rates on unsecured business loans range from around 14% to more than 50%. Meanwhile, traditional bank loans range from around 6-11%, per the Federal Reserve’s Small Business Lending Survey. If your business struggles to repay its loan in a timely manner, unsecured loans tend to be less financially forgiving.

Types of Unsecured Business Loans

There are four main types of unsecured business loan structures, each tailored to different funding needs, repayment timelines, and borrower profiles. Here’s an overview of each one and how they can help:

Unsecured Term Loans

An unsecured term loan provides a lump sum upfront that the borrower repays in fixed installments over a defined period, typically around 1-5 years. These work well for large expenses like renovations or hiring pushes that can be tough for companies with low liquidity. To approve an unsecured term loan, traditional bank lenders may require at least two years in business and a personal credit score of 670 or higher. Online lenders tend to be more flexible, sometimes approving businesses with as little as six months of operating history and credit scores in the 600 range.

Lines of Credit

Lines of credit are built more for short-term needs than longer-term investments. You can borrow funds by making drawdowns up to a preset limit rather than getting a lump sum up front. A business might draw down working capital to cover payroll during a slow period, buy inventory ahead of a busy season, or bridge the gap while waiting on unpaid invoices. Because lines of credit are built for quick needs, they typically come with shorter repayment terms and a focus on recent revenue consistency and current cash flow. Slash Capital is a line of credit that can be repaid on 30, 60, or 90 day cycles. Approval criteria is offer-specific, and set through underwriting by the lending program, which is issued by Lead Bank and serviced through Slope.

Merchant Cash Advances

A merchant cash advance (MCA) provides an upfront lump sum in exchange for a percentage of the business's future sales revenue. In these cases, the lender automatically deducts a fixed portion of card sales until the advance is fully repaid. Because approval is based primarily on sales volume rather than credit score, MCAs can be accessible to businesses that might not qualify for other loan types. The downside is the fact that MCAs are priced using factor rates rather than traditional APRs, so the effective annualized cost can actually reach over 100% for businesses who don’t repay quickly.

Invoice Factoring

If a business is approved for invoice factoring, they’ll sell their unpaid invoices to a third party to receive an immediate cash advance. The buyer advances a percentage of the invoice value upfront, typically 80% to 90%, then releases the remainder minus its fees once the customer pays. From there, the buyer takes over collection responsibility, which ends up saving some headaches for the customer’s accounts receivable team.

Since the invoices themselves represent the basis for the advance, your credit and business history won’t usually play too big a part in the approval process. If your business has a large number of reliable customers on slow repayment terms, invoice factoring may be worth a look.

Who Qualifies for Unsecured Business Loans?

Qualification standards can vary by lender and product, but most unsecured business loans assess the same core set of factors:

Business credit score: Traditional bank lenders look for good credit scores from the three main bureaus, Experian, Equifax, and Dun & Bradstreet. The standards and scoring systems vary between these bureaus, but in any case, lenders will want to see a consistent payment history and healthy credit utilization.
Personal credit score: Lenders may also pull your personal credit score, sometimes due to a lack of an established business score. Standard banks may require a personal credit score of roughly 660 to 670, while online lenders may accept scores in the 580 to 620 range. In either case, lower scores may lead to higher interest rates and vice versa.
Time in business: Most lenders require applicants to have at least two years in business as a minimum threshold. If you’re working through an alternative lender or seeking an option like an MCA, you may be able to receive funding if you’ve been in operation for under a year.
Annual revenue: The more revenue, the better. While thresholds vary between lenders, they’re overall more likely to approve applicants with strong cash flow or those running at a profit. If you’re looking for a large loan amount, the minimum revenue threshold may rise along with it.
Debt-to-income ratio: Lenders often assess how existing debt obligations compare to the business's income. Generally, they’ll look for a ratio of around 60% or below.

Beyond specific floors and ceilings, several subjective factors can shape the terms you’ll get. Consistently growing revenue is lower-risk for a lender than volatile month-to-month revenue, even if the average number is good in both cases. Your industry also matters, as industries like hospitality and retail come with higher default rates.

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What documentation will you need for an unsecured business loan?

Most lenders will ask for the same core set of supporting documents and information, so it’s best to prepare them up front rather than waiting to learn what your application requires. Requests typically include:

EIN confirmation letter (IRS form CP 575, or a 147C reprint if the original is lost)
Business formation documents (articles of incorporation or organization, operating agreement, DBA filing)
The last two years of business tax returns, plus the owner’s personal tax returns
Recent business bank statements (last 3-12 months)
Year-to-date profit & loss statement and balance sheet
Debt schedule listing existing business obligations and their terms
Business licenses relevant to the industry
A business plan or use-of-funds statement in cases of larger loans

How to Apply for an Unsecured Business Loan

While qualification thresholds can vary pretty widely, your application process itself likely won’t. Whether you’re applying to a traditional bank or an alternative lender, you’ll want to follow these steps as you prepare your application:

Define the amount and purpose: Before you approach any lender, you’ve got to know how much money you need and what it’s for. It’s a good idea to write out a specific, reasonable request with concrete plans that can be referred to throughout the application and underwriting process.
Review your credit reports: Assess both your personal and business credit reports before applying, even if you’re not sure they’ll be pulled. The earlier you do this, the sooner you can raise any unexpectedly low scores.
Compare lenders: It’s always good to get quotes from multiple sources before committing. Sit down to calculate the total cost of borrowing, including all fees over the full repayment period, rather than just the interest rate. Online lenders tend to offer faster funding with higher costs, while banks and credit unions move slower but may come with better rates for qualified borrowers.
Gather documentation: From the lender’s point of view, documentation may be the most important step. You may be asked for recent business bank statements, business and personal tax returns, a profit and loss statement, formation documents such as articles of incorporation or an operating agreement, and financial projections.
Submit the application: It’s finally time for the actual application. Here, you’ll likely answer questions about your business’s details, ownership, existing debt, and the loan request itself. After completing the application, keep your eyes and ears out for any RFIs (Requests for Information).
Review the final loan terms: Before formally signing, always verify the interest rate, repayment amount & schedule, any prepayment penalties, and whether a personal guarantee is required. If you’re happy with these details, go ahead and sign.

Traditional banks move more slowly than online lenders, often taking 2-3 weeks to release funds after the underwriting process. Unsecured loans are generally approved much more quickly than secured loans, since your assets don’t have to be evaluated and appraised.

Access Flexible Financing for Your Business with Slash

Not every business loan fits every situation. A term loan or SBA loan makes sense for a large, planned capital investment with real collateral and time to run through a multi-week underwriting process. For the short-term needs that don't warrant either (bridging a late receivable, funding payroll before a customer pays, or covering inventory ahead of a busy season), a multi-year loan is the wrong shape of financing. Slash's Working Capital Financing is built for exactly that: a short-term line of credit with 30, 60, and 90-day repayment terms sized to the underlying need.

To apply, Slash customers provide an estimate of annual revenue and complete an application through our partner Slope. Slope handles all underwriting and eligibility decisions, which may consider factors including revenue thresholds, business requirements, and a credit review. The initial application uses a soft credit check, which doesn't affect the applicant's credit score, and the full process from application through payout is designed to take one to two business days in most cases.

Here’s what else you get with Slash::

Slash Visa® Platinum Card: The Slash Card is a corporate charge card that allows you to set customizable spending controls and issue unlimited virtual cards for handling team expenses, vendor payments, subscriptions, and more. Users can also earn up to 2% cash back on business purchases.
Business banking: FDIC-insured business checking, protected up to $150M through Column N.A.'s insured cash sweep network.²
Accounts payable and receivable: Create invoices, track payment status, and collect payments via multiple methods all in your dashboard. For your bills, Slash can parse an uploaded invoice, route each bill for approval, and track its status from pending to paid, so payables don't slip through the cracks.
Diverse payment methods: Slash supports a wide range of payments, including card spend, global ACH, international wire transfers to over 180 countries via SWIFT, and real-time domestic payments through RTP and FedNow.
Native cryptocurrency support: Send and receive USD-pegged stablecoins USDC and USDT across eight supported blockchains for faster, lower-cost global payments.⁴

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Frequently Asked Questions

What’s the difference between an unsecured business loan and a secured business loan?

Secure business loans require applicants to put up assets like inventory and property as collateral in order to give lenders a secondary way to reclaim value on a defaulted loan. Unsecured business loans don’t require businesses to pledge assets, instead basing approval on your credit profile, revenue history, and overall financial health.

Is a personal guarantee always required for an unsecured business loan?

Not always, but it's fairly common. Many lenders require a personal guarantee even when no collateral is pledged in order to make sure there’s still some sort of liability for repayment even if the business defaults. Your loan agreement will specify whether a personal guarantee is a condition of the loan and under what circumstances it applies.

What's the difference between invoice factoring and invoice financing?

They're similar, but structured differently. With invoice factoring, you sell your invoices to a factoring company at a discount, and the factoring company takes over collection from your customers. With invoice financing (also called accounts receivable financing), you borrow against your invoices while retaining responsibility for collecting payment yourself. Once your customers pay, you can repay your lender.

How do I know whether to choose a traditional bank or an online lender for an unsecured loan?

Overall, it usually comes down to how quickly you need funding and how strong your credit profile is. Traditional banks tend to have stricter requirements, but offer lower rates for borrowers who qualify. Online lenders process applications more quickly and accept a broader spectrum of applicants, but they usually charge higher interest rates to balance the added risk. A bank or credit union may be the lower-cost option if you have strong credit and liquidity, while an online lender may be the more practical path if you need funds within a week or two.