Loan types
Unsecured business loans, and what the word actually protects
No specific asset is pledged. That is not the same as no recourse. Almost every unsecured business loan carries a personal guarantee and a blanket lien on everything you own.
An unsecured business loan is one where you do not pledge a specific asset. That is the entire meaning of the word. It does not mean the lender has no claim on your property, it does not mean you walk away if the business fails, and in most cases it does not even mean nothing gets filed against your company. It means no particular machine, invoice, or building is named.
Two things fill that gap almost universally. A personal guarantee, which puts your personal assets behind the debt. And a blanket UCC-1 filing on all business assets, which is a security interest in everything the company owns without naming any one item. Read those two documents and you will know exactly how unsecured your unsecured loan is.
What is actually on the table
Several different products get sold as unsecured business loans, and they price very differently. The label tells you almost nothing about the cost.
- Bank unsecured line of credit
- 9 to 16 percent on the drawn balance, for established businesses with two years of profitable returns. The cheapest thing on this list and the hardest to get
- Online unsecured term loan
- Commonly 20 to 45 percent effective, 6 to 36 months, funded in days rather than weeks
- Short term unsecured loan
- Quoted as a factor of 1.15 to 1.49 with daily or weekly payments. Fast, and the most expensive amortizing option
- Business credit cards
- Around 19 to 30 percent revolving, underwritten on your personal score, limits usually $10,000 to $50,000 per card
- SBA 7(a) under $50,000
- SBA does not require collateral at or below $50,000, and its rules say a file should not be declined for lack of collateral alone. Still guaranteed personally
- Merchant cash advance
- Not technically a loan at all, but it is unsecured in the same sense and priced well above everything above it
Notice the spread. The same $50,000 costs about $5,500 on a bank line and about $12,500 on a short term unsecured deal, and both are correctly described as unsecured. If a broker leads with the word rather than the number, that is the tell.
The same $50,000, five ways
Holding $50,000 for twelve months, a bank line at 11 percent costs about $5,750 including an annual fee. An online term loan at 28 percent with a 3 percent origination fee costs about $9,400 all in. A short term deal at a 1.25 factor costs $12,500, which annualizes near 49 percent once you account for paying it down weekly from day one. A card at 24.99 percent, carried and never paid down, costs about $12,500 in interest alone.
The bottom bar is the one worth staring at. A secured receivables line at 13 percent costs about $6,500 for the same twelve months. If you have receivables, inventory, or unencumbered equipment, pledging them is worth roughly $6,000 a year on $50,000. That is not a small trade for the convenience of skipping an appraisal. See the full comparison before you default to unsecured because it sounded safer.
How the amount gets sized
With no collateral to measure, lenders size unsecured loans off revenue. The common rule across the online market is 8 to 15 percent of trailing twelve month revenue, with the top of that band reserved for long time in business, clean statements, and strong credit.
| Annual revenue | Typical unsecured offer | What moves you toward the top of the range |
|---|---|---|
| $250,000 | $20,000 to $37,500 | Two years in business, 680 plus score, twenty deposits a month |
| $600,000 | $48,000 to $90,000 | Consistent monthly deposits, no negative days, no open positions |
| $1,200,000 | $96,000 to $180,000 | Healthy average daily balance, industry outside the restricted list |
| $3,000,000 | $240,000 to $450,000 | Above this level most lenders want financial statements, not just statements |
This is why a business with $1,200,000 in revenue and $600,000 sitting in receivables can often borrow more against the receivables than it can unsecured. Collateral raises the ceiling. Skipping it lowers both the ceiling and the term. Your average daily balance matters more here than almost anywhere else, because with nothing pledged it is the lender's only real signal of whether the payment will clear.
One more sizing rule catches people out. Most unsecured lenders count open positions against your capacity before they count revenue. If you already have an advance debiting the account, the new lender subtracts that payment from your available cash flow and often refuses to be in second position at all. Two unsecured facilities against one revenue stream is the structure that ends more small businesses than any pricing decision, which is why stacking gets its own page.
What the personal guarantee actually does
This is the part of the file that owners skim and should not. A guarantee is a separate contract in which you personally promise to pay if the company does not, and there are meaningful variations.
- Unlimited personal guarantee. The standard. You are on the hook for the full balance plus collection costs and attorney fees. Most small business paper is written this way.
- Limited guarantee. Capped at a dollar amount or a percentage, sometimes split proportionally among multiple owners. Worth asking for and occasionally granted on stronger files.
- Validity guarantee. You warrant that the collateral and the information you gave are real, but you are not guaranteeing repayment. Common in receivables and purchase order deals and much better for you. See validity guarantee.
- Joint and several. With two or more guarantors, the lender can collect the whole balance from whichever of you has assets. Your partner's ability to pay does not limit your exposure.
- Spousal signature. Requested in community property states and where household assets are jointly held. Regulation B limits when a lender may require a spouse's guarantee, so ask why it is being requested.
When unsecured is genuinely the right call
There are real situations where paying the premium makes sense, and they have nothing to do with wanting to protect your assets, because the guarantee already ended that conversation.
The first is speed. Secured facilities need appraisals, field exams, lien searches, and control agreements, which take weeks. If the opportunity has a clock on it, unsecured is the only structure that funds inside the window. The second is that you have nothing to pledge: a service business with no inventory, few receivables, and leased equipment simply has no collateral, so unsecured is not a preference, it is the only category available. The third is size. Below about $150,000 the fixed cost of documenting and monitoring collateral eats the interest savings, which is why almost nothing at that size is secured in a meaningful way.
What Exp Capital does with this
Exp Capital Solutions is a broker. We do not lend, we do not approve, and we do not price. What we do is take one file to the funding partners most likely to price your revenue and credit profile well, then show you every offer with the total dollar cost, the payment, the term, and exactly what is being filed against the business. When you have collateral and the timeline to use it, we will say plainly that a secured facility saves you thousands, even though the secured deal takes longer and pays us less.