Ways to Get an SME Loan without Collateral

Business loans are applied for a host of reasons including initiating new ventures, new purchase, expansions, working capital requirement, bill discounting, dealer and vendor refinancing etc. The current finance market has found a huge scope in providing funds for the SMEs or the small and medium enterprises by updating all their product lines or services regularly and even coming up with special counters.

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The fact remains that a conventional loan could be difficult to get without any collateral. A bank would usually be requiring some kind of asset like real estate or maybe equipment that you agree to give away if you fail to make the loan repayments. The necessity for collateral for securing a bank loan could be really frustrating and exasperating for business owners who do not own any remarkable assets or those who are just trying to come up with startups.

Loans for small and medium enterprises without collateral are particularly difficult and challenging to get for people who have bad credit scores. Moreover, getting a loan would be time-consuming. As a result, any loans that have no collateral could be doubly difficult to get if you require the funds promptly. However, conventional bank loans are surely not the sole means for acquiring business financing. There are numerous kinds of business loans that would be requiring no collateral and several of them are faster to get in comparison to traditional bank loans.

Different Kinds of Business Loans without Collateral

The key to success in getting SME loans without collateral is to check out alternative lenders. These lenders are known to be offering numerous types of small business loans without asking for any collateral.

Merchant Cash Advance

Merchant cash advance is referred to as credit card factoring and is actually a kind of financing that involves the lender providing money upfront and repayment is taken by deducting automatically a percentage of credit card sales of your business in future. Typically, a business could be getting credit card factoring provided they could show, at least, 4 to 6 months history of credit card sales’ revenue which could be reviewed and evaluated by a provider of merchant cash advance. Though this works out to be pretty expensive in comparison to the typical business loans, merchant cash advance could be a fruitful choice for any startup business loan without collateral which could promptly provide funds.

Accounts Receivable Financing

This is quite similar to merchant cash advance. Accounts receivable financing helps you by giving working capital much ahead of time that is based on the upcoming payments coming from your customers’ accounts. You are supposed to sell open invoices to any third party known as a factor for certain percentage of the upfront value. Accounts receivable financing does not require collateral and could be useful for purchasing supplies or inventory for fulfilling open orders.

Equipment Loan

Technically speaking, an equipment loan actually is supposed to be a collateral-based loan since the equipment bought is actually used as collateral. The main difference being that in this case the collateral that has been used for acquiring the loan is bought with the loan funds, so there is no need for any prior existing asset. Several business owners appreciate the difference between equipment loan and any other loan with collateral using borrower’s personal property or asset as a guarantee or a loan, seeking your business assets as collateral.


It is important to have a clear-cut and professional business plan before you approach any banks or financial institutions for an SME loan. Moreover, you should possess sound knowledge about your products’ market and what are the effective ways of operating there. Banks would surely be focusing on long-term loans for working capital for small and medium enterprises and also the effective expansion of credit facilities especially to the unexplored and new geographical areas such as the lesser-developed states. The government is currently taking significant initiatives in stepping up credit flow to the small and medium enterprises.


Author Bio: Anil Bhandari is a debt management consultant in a renowned public-interest firm. He has been effectively working towards finding the ideal budgeting, loaning or investment solutions, and has recently taken to blogging. He loves to share helpful tips, tricks, and resources such as https://magma.co.in.

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