Business Loan Collateral De-Mystified: When You Need it, and When You Don’t

Last Updated on June 20, 2017

Many banks make the claim that business loan collateral is an “absolute must.” They say there is no grey area, no room for discussion, and no other option. Applicants either supply sufficient business loan collateral — which is often a mix of business and personal assets — or they don’t get a loan. End of story. However… 

Business Loan Collateral Demystified: When You Do & Don't Need It

There are Business Loans Without Collateral Requirements!

There’s actually much more to the story, because business loan collateral is only mandatory for BANK business loans. There are many other business loans available that don’t require any kind of collateral, such as:

  • A working capital loan, which is suited for long-term investments, such as renovating buildings or facilities, expanding into new markets, launching a new product line, acquiring and integrating a new business, and so on.
  • A business line of credit, which is suited for short-term expenses, such as seasonal payroll increases, covering urgent repairs or upgrades, taking care of an unexpected tax bill, and so on.
  • A merchant cash advance, which is suited for businesses like restaurants and repair shops that conduct most or all or their transactions via credit card (this is because at the end of the day a small percentage of daily credit card sales is withdrawn and used to pay down the loan).

Again, it bears repeating: none of the above require collateral, or even excellent credit. In fact, even a past discharged bankruptcy typically isn’t a deal-breaker, and businesses don’t have to be profitable or cash flow positive.

Why Do Banks Demand Collateral in the First Place?

If business loan collateral is optional rather than mandatory, it begs the question: why do banks insist on it at all? Wouldn’t they serve more customers — and therefore make more profit — if they eliminated this requirement?

Even with their demands for business loan collateral, banks make an enormous amount of profit by going upstream and targeting large enterprises that have no problem pledging assets such as real estate, securities, and so on. As such, banks have zero incentive to change their restrictive lending policies.

Learn More About Collateral Business Loans

To learn more about getting a fast business loan without collateral — such as a working capital loan, business line of credit, or merchant cash advance — contact the National Business Capital team today.

Your consultation with us is free, and there’s never any pressure to move forward. As you’ll see from our stellar reputation, we strive to do the right things the right way. If that means you choose us to be part of your business success story, we’d be honored —  and rest assured we’ll be there to help make it happen.


National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

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About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.