This is a version of a post that originally appeared on Kabbage.com.
Small business loans don’t always require a mountain of paperwork or require you to sign your life away. In fact, there are many options these days for small businesses in any financial situation to receive financial support. Most small business loans, especially those guaranteed by the Small Business Administration, require the borrower to put up personal collateral. This gives the lender peace of mind in case the borrower is not able to return payment. But what if your small business doesn’t have any collateral yet to guarantee? Is a small business loan out of your league? No! There are lenders out there who will provide you with funding even without collateral.
Small Business Administration Backed Loans
The SBA guarantees most loans that go through banks. It is much easier to get an SBA guarantee if you put up collateral, but that is not your only option. You can also provide the SBA with your own personal guarantee. In doing so, the SBA can be certain that you will be held accountable for loan repayment. In fact, the SBA has a 7(a) loan program that just requires the borrower to show proof of positive cash flow for debt service and acquisition price. If accepted to this program, the SBA will guarantee 75 percent of any loss on the loan to the lender.
Alternative Lenders
Although many alternative lenders do require a personal guarantee of cash flow, they do not necessarily require collateral. Instead, when you sign a loan agreement, you personally guarantee that you will pay back your loan. But you do not have to put up any real estate or personal collateral. Online resources, like Kabbage, offer these services and can guide you through the process.
Peer-to-Peer Financing
P2P Lending doesn’t operate through traditional financial institutions; instead, it requires the cooperation of individuals. Individuals provide unsecured loans to borrowers based on their business plan. There are many websites and platforms that provide more information on how to apply for P2P Financing. When receiving a P2P loan, everything is done online. Often times these types of loans have higher interest rates and shorter terms, but in most cases everything is based on the credit history of the borrower.
In most cases your chances of receiving a small business loan increase dramatically if you are able to put up collateral, so if at all possible wait until you have collateral or find some. When not possible, you have a few options to look at like crowdfunding, investors, or alternative lenders. Just because you do not have bank qualifications, do not give up on your dream and finding ways to finance it. If you have a truly great business, that makes an impact on people’s lives, so you will find a way to keep it thriving. Where there is a will, there is a way.
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