Do you want a business loan without a mortgage over your own home?
Many lenders ask for security, such as the equity in the business owner's home and not everyone is able or willing to offer this. Maybe you rent your home. Maybe you want to keep your home separate from your business risks.
Fortunately, some lenders take a different approach. Instead of asking for large assets as security, they assess the strength, cash flow, and overall viability of your business.
See Also: Loan Options for Small Businesses
What lenders look for instead of property
When lenders don’t require property or other large personal assets as collateral, they shift their focus to the financial health and reliability of your business. These lenders rely on key indicators that demonstrate your business’s ability to repay the loan, even without traditional security.
Here are the main factors they evaluate:
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Business cash flow - Consistent income (e.g. monthly revenue, bank statements) that can cover loan repayments
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Business plan and growth potential - A clear roadmap showing how the business will generate revenue and grow.
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Credit history - Personal and business credit scores, plus payment history with lenders and suppliers.
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Time in business – Lenders often prefer businesses operating for 6–12 months or more
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Business structure and documentation – Legal setup, financial statements, and clear ownership details to help build lender confidence
Business loans you can get without putting up property
Explore how to get funding for your business with these different loan options that require no collateral (smartphone users scroll left to right).
|
Loan Type |
Description |
Suitable For |
Key Requirements |
Pros |
Cons |
|---|---|---|---|---|---|
|
Unsecured Business Loan |
Loan based on credit and revenue, no collateral needed. |
General working capital |
Good credit, steady revenue |
Quick access, flexible use |
Higher interest rates |
|
Business Line of Credit |
Revolving credit to use as needed. |
Variable or ongoing expenses |
Decent credit, steady cash flow |
Pay interest only on funds used |
Harder to get large limits |
|
Invoice Financing |
Cash advance against unpaid invoices. |
Businesses with B2B invoices |
Reliable invoicing, steady customers |
Fast cash flow |
Fees add up, sacrifice total invoice amount |
|
Merchant Cash Advance |
Lump sum repaid via a percentage of card sales. |
Retail & hospitality with card sales |
Consistent card sales |
Easy to qualify, fast funding |
High fees, daily repayments |
|
Revenue-Based Financing |
Repayments tied to monthly revenue. |
High-revenue, growth businesses |
Strong monthly revenue |
Flexible payments |
Can be costly over time |
Which business loan doesn't require a mortgage over my home?
Unsecured business loans are often offered by alternative lenders, as banks tend to require either residential or commercial equity as security.
Depending on your financials and history, you could ask for as much as $500,000 in a loan, a line of credit or in equipment finance.
Capify
Capify unsecured business loans range from $5,000 to $500,000 with rates available on application.
Capify promises that funds can be in your bank, once the loan is approved, in about 24 hours. There are no application fees on Capify business loans. To be eligible, you need to have at least six months' trading history and a minimum monthly turnover of $10,000.
Repayment terms range from three months to one year, with flexible payment options, and you'll also pay a three per cent origination fee.
Prospa
Prospa has unsecured business loans with rates varying according to the risk profile and credit score of the business. The minimum loan amount is $5,000, and for small businesses, the maximum is $150,000. The Prospa Unsecured Business Loan is for small businesses with six months' trading history and a minimum monthly turnover of $6,000.
Repayment terms range from three months to three years, and you can be approved and funded within 24 hours. There's a three per cent origination fee, and you can make extra payments or clear the loan early with no penalties.
Become
Become is an online platform for SMEs to find and optimize funding solutions. Business owners can get loan offers from multiple lenders including OnDeck and Prospa.
Moula
The Moula Unsecured Business Loan offers small businesses between $10,000 and $250,000 in financing, and the application is entirely online. There's a two per cent establishment fee, and then interest rates can vary by a wide margin, with your repayments being made fortnightly.
Repayment terms range from six months to two years, and you need six months' trading history and at least $10,000 in sales each month.
Overdraft vs business loan
An overdraft on a business bank account is a common way for business owners to manage cash flow and access credit when required for bills, suppliers and other expenses. An overdraft operates like a line of credit that is available if required. The overdraft facility does not cost you interest when your bank account balance is above zero.
If you don't have large one-off expenses to pay for and wish to smooth the monthly income and outgoings to manage cash, an overdraft on a business bank account might be worth considering.
First published on January 30, 2020
Photo by Kampus Production via Pexels
