Images by GettyImages; Illustration by Hunter Newton/Bankrate
Key takeaways
- Secured fast business loans require collateral.
- Unsecured fast business loans can often be funded faster than secured fast business loans.
- Secured fast business loans are a good fit for businesses facing difficulty getting approved for unsecured funding.
Figuring out how to fund your business can take work and time. According to a 2024 Report on Employer Firms, 91 percent of employment firms experienced financial challenges in the last year. When you are dealing with financial difficulties in your business, you may need to get your hands on extra cash quickly.
Fast business loans prioritize speed of funding so you can get the funds you need as quickly as possible. Consider pros and cons of fast business loans if you think you want to apply for one. You can get both unsecured fast business loans and secured fast business loans. When you apply with the right lender, you can often get funding from a fast business loan as soon as the next day.
Secured vs. unsecured fast business loans
Term loans and business lines of credit can be both secured and unsecured. Some loans, like equipment financing and invoice financing, are secured. Some, like invoice factoring or merchant cash advances, are almost always unsecured.
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Secured fast business loans |
Unsecured fast business loans |
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Credit requirements |
Can get approved with no or low credit |
Higher credit score may be needed |
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Collateral required? |
Yes |
No |
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Loan terms |
Lenders can seize collateral if you default on the loan |
Lawsuit required to collect on defaulted loans |
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Personal guarantee required? |
Sometimes |
Typically |
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Rates |
Lower interest rates |
Higher interest rates |
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Types of lenders |
Banks, credit unions, online lenders |
Banks, credit unions, online lenders |
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Credit-building opportunity |
Can be a great opportunity to build credit if you have poor or no credit history |
You can improve your credit by making timely payments, but loans are typically only available to those who already have good credit |
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Funding speed |
No appraisal process for collateral so funding is typically faster |
Can be fast, but requires extra time to appraise collateral |
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Loan amounts |
Can typically borrow more because the loan is backed by collateral |
Loan limits may be lower because there is no collateral |
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Loan types |
Business term loans, SBA loans, business line of credit, equipment loans, commercial real estate loans, invoice factoring, inventory financing |
Business term loans, business line of credit, merchant cash advance, invoice factoring, inventory financing |
Secured fast business loans
Fast secured loans require collateral. To get this type of loan, you must provide an asset of value to secure the loan. If you fail to make payments, the lender can take the collateral to cover its losses. That helps reduce the lender’s risk.
Pros
- Available for bad credit borrowers
- Fast financing
- Generally come with better interest rates than unsecured business loans
- Larger loan amounts available
Cons
- Credit can be severely damaged if you default on the loan
- Must have assets you can use to secure the loan
- Potential of losing assets
Unsecured fast business loans
Fast unsecured loans have no collateral requirements. You can apply even if your company has no assets to offer to secure the debt. But, these loans may have higher rates and strict lending requirements compared to secured loans.
Pros
- Fast financing
- No collateral required
- Quicker application process
Cons
- Higher interest rates and fees
- May required a personal guarantee
- Mostly available to good-credit borrowers
The best business credit cards are often unsecured and don’t require collateral. This is a great alternative to a fast business loan because it offers easy access to funds while potentially earning rewards and building credit. But you will likely need to provide a personal guarantee.
When to take out a fast secured business loan
Taking out a fast secured business loans means you put your collateral on the line. If you default on the loan, the lender can legally take whatever collateral secures the loan. Making the decisions to take out this kind of loan requires you to have a solid financial plan to repay the loan. Otherwise, you may lose more than you can gain from taking out the loan.
Getting a secured fast business loan isn’t the right option for everyone. Here’s when it may be a good idea:
- Your business needs quick funds and has assets to provide as collateral.
- You have bad credit and are unable to qualify for an unsecured business loan.
- You are looking to get the most affordable interest rates for your business loan.
Because fast business loans often require daily or weekly payments, you run the risk of defaulting if you can’t afford your payments. It is recommended to use a business loan calculator to determine the cost of the loan and compare fast business loan options to find the best one for you.
When to take out a fast unsecured business loan
An unsecured fast business loan has its own set of benefits. Here’s when it may be the right choice to help fund your business needs:
- You want the quickest application and funding process. No collateral means there is less to consider in the application.
- You plan to pay off the loan quickly. The extra effort of offering collateral to lower the interest rate on a secured loan won’t save you much if the loan only lasts a few months.
- You have good credit and/or high annual revenue, as these typically mean better loan terms.
Borrowers with good credit and high annual revenue may qualify for better terms with another type of loan, but you’ll likely lose the quick approval and funding that a fast business loan offers.
Borrowers with good credit and high annual revenue may qualify for better terms with another type of loan, but you’ll likely lose the quick approval and funding that a fast business loan offers.
Bottom line
If you need funds quickly, both secured and unsecured fast business loans are worth considering, regardless of your business’s credit profile. Though secured loans require you to put your business’s assets at risk, doing so can be worth it if you save money through lower rates and fees.
Unsecured loans may come with higher interest rates, but they open up funding for companies who lack the assets for a secured loan. Before signing a loan agreement, be sure to weigh the pros and cons of each loan type to determine which is best for your business.
Frequently asked questions
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No, not all business loans need to be secured. If your company has strong financials, good credit, and a long operating history, that can help it qualify for unsecured loans. Some lenders may ask for a personal guarantee on your business loan in place of collateral.
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Whether you want a secured or unsecured loan, the process starts the same: you’ll have to find a lender and fill out an application.
Both loan types require similar info, such as your company’s financial documents, credit score, personal information and business plans. When applying for a secured loan, you’ll need to provide details about the proposed collateral.
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The quickest way to get a business loan is to have a complete and accurate application with the required documentation. Applying through an online lender with a streamlined process can also speed up approval and funding.
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