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4-minute read<\/p>\n
What if you need a loan for your business but have no collateral to offer as a security? Can you still get financing? The answer is generally yes.<\/p>\n
Banks usually need some kind of guarantee in case you can\u2019t pay back your loan. This generally comes in the form of tangible or intangible assets that the bank can sell to get its money back if you stop paying the loan. Collateral can be a physical asset\u2014a vehicle, equipment or building\u2014or other items with concrete value, such as accounts receivable, inventory, intellectual property or the business owner\u2019s personal assets.<\/p>\n
\u201cA banker will have different risk tolerances and criteria for a loan that does not have tangible assets to offer as collateral,\u201d says\u00a0Jennifer Clark,<\/span>\u00a0BDC Business Centre Manager in Hamilton, Ontario. \u201cIt typically helps for a company to have proven cash flow, strong management and a solid business idea with market traction and a lot of potential.\u201d<\/p>\n Here are various business loans that you may be able to obtain with no collateral, provided that your business is financially solid.<\/p>\n<\/div>\n<\/div>\n Working capital<\/a>\u00a0or cash flow loans are generally intended to help businesses pay for\u00a0shorter-term<\/span>\u00a0expenses, such as an anticipated cash flow shortfall or an investment in growth. Examples include:<\/p>\n Banks often require collateral for such a loan, typically in the form of accounts receivable, inventory or an entrepreneur\u2019s own assets. But some institutions don\u2019t require collateral if the loan is for a smaller amount.<\/p>\n \u201cIf there\u2019s no security for the loan, bankers look at the company\u2019s cash flow and how much they can afford to borrow based on EBITDA and\/or forecasted cash flow,\u201d Clark says. \u201cThey also look at company management, the industry, whether the project makes sense and the owner\u2019s personal credit score and net worth.\u201d<\/p>\n Scoring well on these elements can help a business obtain better loan terms.<\/p>\n Without tangible collateral, you will generally be required to sign a personal guarantee to obtain a working capital loan. In addition, depending on the analysis of your financial situation, a security may also be required.<\/p>\n A\u00a0market expansion loan<\/a>\u00a0is similar to a working capital loan. Businesses with proven cash flow and strong finances can often obtain one without collateral. It is intended for businesses needing capital to grow. Projects can include expanding your market, launching a new product or opening a new location.<\/p>\n<\/section>\n<\/div>\n<\/div>\n If there\u2019s no security for the loan,\u00a0bankers look at the company\u2019s cash flow<\/span>\u00a0and how much they can afford to borrow based on EBITDA and\/or forecasted cash flow.<\/blockquote> Technology loans<\/a>\u00a0are similar to working capital loans, with terms particularly geared to businesses needing capital to invest in hardware, software or IT planning or technology firms seeking growth capital.<\/p>\n Such loans generally offer flexible repayment suited to tech investments or businesses. Depending on the financial situation of your business, this type of loan can be granted without the entrepreneur having to provide a security.<\/p>\n Family, friends and angel investors may be willing to lend you money without collateral, though they may ask for a share in your company.<\/p>\n\n\n\nGuide to getting a business loan<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
\n\n\n\n\n1. Working capital loans<\/h2>\n
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2. Market expansion loans<\/h2>\n
\n\n\n\n\n\n\n3. Technology financing<\/h2>\n
4. Family, friends and angel investors<\/h2>\n