Best Unsecured Business Term Loans

Specific collateral is what most people mean by “secured”: a mortgage on a building, a lien on a truck, a claim on a piece of equipment. Unsecured term loans skip this, which is why they’re popular with service businesses, consultants, restaurants that lease their space, and online sellers.

A blanket lien is the part that surprises owners. Many online lenders take “a general lien on business assets,” the phrase Bankrate quotes from OnDeck’s terms, usually recorded with a UCC-1 financing statement at your state’s secretary of state. It doesn’t name one asset; it gives the lender a claim on receivables, inventory and accounts generally. It can also complicate your next loan, because a second lender may not want to stand behind the first one’s lien. You can search your state’s UCC filings by business name to see what’s on record.

A personal guarantee is the biggest risk. It makes you, not just your LLC or corporation, responsible for the debt. If the business closes owing money, the lender can sue you personally and, after winning a judgment, pursue personal bank accounts or wages depending on your state’s laws. The Federal Reserve Banks’ latest Small Business Credit Survey report found that 59% of employer firms with debt used a personal guarantee and 38% secured debt with personal assets, up from 31% in 2019.

We found the pattern in that chart holds across almost every lender we compared: each step down in credit score or time in business costs you a lot more in price than it does in paperwork. A business with two years of history and a 700 score that takes an online loan because it’s faster is often paying several times the interest it needed to. Ten days of patience at a bank can save thousands.

Two notes on names. Funding Circle sold its U.S. business, including its loan portfolio, to iBusiness Funding in 2024, so older reviews of “Funding Circle term loans” now describe iBusiness Funding. And several companies on “best unsecured loan” lists are marketplaces or brokers rather than lenders. Brokers aren’t bad, but they’re often paid by the lender, and the lender’s offer will usually carry that cost. Ask who the actual lender is before you share bank statements.

Under the SBA’s current 7(a) rules, lenders aren’t required to take collateral on 7(a) Small loans and SBA Express loans of $50,000 or less. Above that, lenders follow their own collateral policies, and for larger 7(a) loans the SBA generally expects lenders to take available collateral but won’t decline a loan solely because collateral is short. Every owner of 20% or more must still sign a personal guarantee, so “no collateral” doesn’t mean no personal risk.

The real advantage is the price cap. SBA sets maximum spreads over the base rate, typically the Wall Street Journal prime rate, which was 7.00% when we checked. For variable-rate 7(a) loans that works out to the following ceilings.

Fees are the other piece. For loans that received an SBA loan number on or after October 1, the start of fiscal year 2027, the upfront guaranty fee on loans of $150,000 or less with terms over 12 months is 2% of the guaranteed portion, rising to 3% for $150,001 to $700,000. SBA waives the upfront fee entirely on loans of $700,000 or less to manufacturers, certain food supply chain businesses and businesses in rural areas, and on SBA Express loans to veteran-owned businesses. Compare that 2% with the 3% to 4% origination fees common at online lenders.

The trade-off is time and paperwork. SBA’s own guidance puts 7(a) Small loan turnaround at roughly 2 to 10 business days once the lender submits, and the lender’s own review adds time before that. Expect to provide tax returns, financial statements and a debt schedule. If you need money in 48 hours, SBA isn’t the answer; if you can wait a few weeks, it often beats every online option on cost.

That chart shows why “cheapest” depends on what you’re optimizing. The six-month online loan has a lower dollar cost than the seven-year SBA loan at its maximum rate, yet it’s by far the most expensive per year of use, at roughly 57% APR, and it pulls about $9,580 out of the business every month. If that payment forces you to borrow again in four months, the real cost compounds. The bank loan wins on both measures when you can get it. The SBA loan’s long term keeps the monthly payment low, which protects cash flow even though you pay more interest over time; you can also prepay to cut that total.

A useful rule: match the term to how long the money takes to pay for itself. A marketing push that returns cash in three months can justify a short loan. Hiring, a new location or a software rollout that pays back over two or three years needs a term at least that long, or the payments arrive before the benefits do.

Underwriters for unsecured loans lean harder on cash flow than secured lenders do, because there’s no asset to fall back on. Expect them to look at your personal credit score and history, time in business, annual revenue and its trend, average daily bank balance and any overdrafts, existing debt payments and liens, and your industry. Restaurants, trucking and construction are often priced higher because of historical default rates, while professional services and health care practices tend to get better terms. If your industry is on a lender’s restricted list, no amount of paperwork will change the answer, which is another reason to prequalify with soft pulls before submitting full applications.

Many online lenders contact borrowers once they’ve repaid around half the balance with an offer to “renew” or top up. The new loan pays off the old one and hands you some fresh cash, but the fees and remaining charges on the original balance are often rolled in. Before accepting, ask for the payoff amount on your current loan, the net cash you’d actually receive, and the APR of the new loan calculated on that net amount. If the new cash is small compared with the new total payback, you’re mostly paying to restart the clock.

A better pattern is to use a short-term loan as a bridge to a cheaper one. Keep your bank statements clean while you repay, avoid new advances, and after six to twelve months of on-time payments, apply to your bank, a CDFI or an SBA lender to refinance what’s left. Lenders view a well-paid online loan as evidence you can handle debt, and swapping a 40% loan for a 10% one on even $30,000 can save several thousand dollars a year.

Finally, keep records. Save the signed agreement, every disclosure, your payment history and the UCC filing number. When the loan is paid off, ask the lender in writing to file a UCC-3 termination, then confirm it on your secretary of state’s website. A forgotten lien can block your next loan years later.

The reason the same 1.15 factor can be 29% or 57% is time. A factor rate is a flat charge that doesn’t care how long you keep the money. Pay it back in six months instead of twelve and you’ve paid the same dollars for half as long, which doubles the annual rate. Daily payments make it worse, because you start handing money back the day after you receive it, so your average balance is much lower than the amount you borrowed.

Several states now require lenders and other commercial finance providers to show you cost disclosures before you sign. A Venable analysis lists California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah and Virginia as having commercial financing disclosure laws, and California’s rules require pricing to be expressed as an APR. If you’re in one of those states, ask for the disclosure form and compare its figures with the translator above. If you’re not, run the numbers yourself.

Also check the prepayment terms. Some lenders discount the remaining fees if you pay early; others, like OnDeck’s standard terms as Bankrate describes them, still collect 75% of remaining interest unless you qualify for a prepayment benefit. If you expect to pay off early, an offer with a slightly higher rate but full prepayment savings can end up cheaper.

The same report found that 38% of employer firms applied for a loan, line of credit or cash advance in the prior year and about 81% of those applicants received at least some of what they asked for. Small banks had the highest share of applicants approved in full, about 57%. Applicants to online lenders were the most likely to report problems, with high interest rates and unfavorable repayment terms leading the list. In other words, getting approved is usually not the hard part; getting approved on terms you won’t regret is.