Understanding the requirements for a small business loan can feel overwhelming. You want to have everything in order before you move forward, which means you need to know if you need to have collateral. In reality, you only need to have collateral for some types of small business loans.


SBA Loans – Get Your Collateral Ready
If you get a loan backed by the SBA, you can expect to have to put down some sort of collateral. This includes most small business loans that you get at banks. Unfortunately, a lot of small business owners don’t have collateral to put up. Even if they do have collateral, the banks or SBA might claim that it’s worthless and won’t accept it to secure the loan.
Fortunately, there are other options.

Factoring – No Collateral Required
If you need financing but don’t have collateral, consider factoring. The lender pays you money based on future invoices. Basically, the lender buys your future invoices from you, and then you pay a percentage of your future sales. Because you’re paying based on future sales, you don’t have to put down any collateral. This is great news for small business owners who don’t have collateral to put down.

Other Forms of Financing
There are also other forms of financing that don’t require collateral. You can choose peer-to-peer financing or go with crowdfunding. You can also borrow from family and friends or even get business credit cards. With so many options out there, it doesn’t make sense to get a loan that requires collateral.

If you’re worried about putting down collateral, don’t be. There is no need to secure a loan with collateral. Look at one of your other options and move forward so you can get your funding without having to find something to put down.