Unsecured Small Business Loans

If you are a small business owner, you know there was welcome relief in the American Recovery and Reinvestment Act of 2009, popularly known as the Stimulus Act. So what was so great about the Act? Among other things, section 501 reduced the fees paid by borrowers so they did not have to pay the dreaded “SBA loan guarantee fee”. This was traditionally 2% of 75% of the loan amount on the large 7(a) loans. Also, section 502 increased the guarantee percentage which pays banks their losses upon default, from 75 to 90%. Cause for celebration? Absolutely. But we must temper our excitement with the fact these benefits may no longer be in effect if Congress does not appropriate more money. In fact, some pundits think it may run out in December based on the volume of SBA loans.

A. Unfortunately, it does not work that way. First, most of my Hard money lender are unsecured and so we don’t even ask about collateral. You’re not describing your equity in your house, the value of your trade fixtures, or anything else. There are simply no liens on property. For larger loans collateral will be required and in today’s market, it will usually be real estate.

Upon opening your business account be sure to get to know the people who work there. These relationships will go far for you in the future. You will also need documentation such as your lists of assets, liabilities, incorporation certificates, Statements of all your finances and projection sheets.

Currently, many unconventional sources of finance are coming up as well, e.g. contract financing, which is one of the widest preferred options. Indeed, it is also known as purchase order financing. Following this option, a lender finances the purchase order rather than the manufacturer. Consequently, the lender gets the agreed portion of profit when the process is finished. This is known as purchase order financing.

The length of time it takes for the SBA to respond to the application depends on the loan program your business elects to apply to. A business plan with financial statements is required for all loan programs. Earnings projections and collateral offerings must be established. In general, the SBA microloan is the least time consuming application and will be approved the fastest. The maximum loan amount was increased to $50,000. The funds cannot be used to buy property or pay debt.

However, for not so big monetary requirements and for the non-homeowners the unsecured loans are perfect. It is good for non-homeowners only because no collateral is required here. So, you can take up this loan and start your business without any tension.

(h) COLLATERAL- The Administrator of the Small Business Administration may accept any available collateral, including subordinated liens, to secure loans made under this section.

So how will you know whether you are eligible for this form of a loan? Just skim through the transactions of your business account, if you like what you see, then there’s your answer! So keep dreaming big, SBA loans are there to help make your dreams come true!

Scroll to top