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Many of the most popular small business funding options in Canada require collateral, including bank loans and Canada Small Business Financing program loans, especially if you’re seeking a larger loan amount.
But what if you’re a small business owner who doesn’t have collateral to secure a loan? Don’t worry—there are a number of funding options available to you as well.
Business loans without collateral are ideal for businesses that:
Business loans without collateral are often referred to as “unsecured financing”, but this term isn’t technically accurate. Most business loans without collateral are secured by some kind of asset. Keep reading to learn more about these options, as well as what funding options are available to businesses with no collateral. But first, let’s take a closer look at what “collateral” actually means.
“Collateral” refers to any asset that a lender will accept as security for a loan. Providing collateral reduces the risk to the lender by providing them with assets they can liquidate if you default on your loan. This means that the lender will be able to recoup some of their costs if you can’t pay.
Collateral assets can include:
Yes, you can get a business loan with no collateral in Canada. There are a number of funding options available to businesses with no collateral. While most traditional lenders will require some form of collateral or guarantee, alternative lenders have more flexible approval requirements that typically do not require collateral.
Some business loans with no collateral, especially those from traditional lenders, will come with other conditions and costs, such as:
Whether such conditions are attached or not, loans without collateral typically come with higher rates and fees, shorter terms, or smaller loan amounts. Different forms of unsecured financing will use different fee structures—for example, merchant cash advances use a factor rate instead of a traditional interest rate. Be sure to compare your options closely, factoring in your business goals, credit history, and financial forecast before you sign a contract.
There are three things you need to understand before you can get a business loan with no collateral:
Let’s take a closer look at these factors.
In Canada, small business funding is available from a number of different types of lenders, including traditional lenders like banks and the Canada Small Business Financing Program, alternative lenders like Greenbox Capital®, and peer-to-peer lending marketplaces. Each of these lenders works differently and will have different collateral requirements:
Different types of lenders offer different types of funding. Here are some of the most popular unsecured loan options for small businesses in Canada:
If you don’t have collateral, you will need to prove that your business is stable and not a liability to a prospective lender. This means preparing up-to-date financial documentation before you apply, including:
Providing a detailed business plan, forecasted financial statements, and a strong credit history will make a positive impression on a prospective lender and can help you acquire unsecured financing if you aren’t able to provide collateral.
If you don’t have collateral, alternative funding from direct online lenders like Greenbox Capital can help you access the working capital you need to maintain operations, cover unexpected expenses, and continue to grow your business.
In addition to no collateral requirements, alternative lenders offer a number of advantages over financing from traditional lenders, including streamlined online applications with less paperwork and more flexible approval requirements, faster processing and approvals—sometimes in as little as one business day—and more room to negotiate terms.
Many types of alternative funding are available to businesses who can’t provide collateral, don’t meet the strict criteria of traditional lenders, or need funding quickly. With funding from as little as $3,000 up to $500,000, business owners in Canada can access alternative funding that suits their unique needs, including merchant cash advances, term loans, invoice factoring, and business lines of credit.
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