How to Secure Financing With Limited Collateral

Collateral has long been the foundation of traditional business lending — but not every entrepreneur owns property, equipment, or other assets to pledge.

If you’re a small business owner with few physical assets, don’t worry: there are still plenty of ways to secure financing with limited collateral in 2025.

Modern lenders increasingly focus on cash flow, revenue, and creditworthiness, not just collateral. Let’s explore how you can still get approved for business funding — even without major assets.

Why Lenders Ask for Collateral

Collateral reduces risk for the lender. It’s a guarantee that if you can’t repay the loan, the lender can recover losses by selling the pledged asset.

Common forms of collateral include:

Real estate or property
Equipment or vehicles
Inventory or stock
Accounts receivable
Cash reserves or certificates of deposit

If you don’t have these, you can still qualify by emphasizing other strengths in your business profile.

What “Limited Collateral” Means

Having limited collateral doesn’t mean you’re unqualified — it simply means your business doesn’t own large physical assets that can easily be valued and secured.

Many service-based, digital, or early-stage companies fall into this category. The good news? Alternative and government-backed financing options are designed with you in mind.

Top Ways to Secure Financing With Limited Collateral

Here are the best funding strategies for small businesses that lack significant assets.

1. Apply for Unsecured Business Loans

Unsecured loans don’t require physical collateral. Instead, lenders base approval on:

Business and personal credit
Revenue consistency
Time in business

Pros:

Fast approval and funding (often 24–72 hours)
No risk of losing property or equipment

Cons:

Slightly higher interest rates
May require a personal guarantee

Top lenders: OnDeck, BlueVine, Fundbox, National Funding

2. Consider SBA-Backed Loans

The Small Business Administration (SBA) partially guarantees loans through private lenders, reducing the need for traditional collateral.

Best options:

SBA 7(a) Loans: Flexible for working capital, expansion, or refinancing.
SBA Microloans: Up to $50,000 for startups and small businesses.
SBA Community Advantage Loans: For underserved or low-asset entrepreneurs.

Why it works: The SBA guarantee protects the lender, not the borrower, making approval easier even if your business has limited assets.

3. Use a Business Line of Credit

A business line of credit offers revolving access to funds without upfront collateral for smaller amounts.

Lenders base approval on:

Monthly revenue
Cash flow trends
Account activity

Pros:

Borrow only what you need, when you need it
Ideal for ongoing expenses or seasonal needs

Cons:

Shorter repayment periods
Requires steady cash flow to qualify

Tip: Online lenders like Fundbox and BlueVine offer unsecured credit lines up to $250,000.

4. Leverage Personal Credit or a Personal Guarantee

If your business is new or lacks collateral, your personal credit can serve as a form of trust with lenders.

Many unsecured or SBA loans require a personal guarantee, meaning you’re personally responsible if the business defaults.

Pros:

Builds business credit over time
Easier approval for startups

Cons:

Personal liability if repayment fails

Tip: Keep business and personal finances separate to maintain credit health.

5. Explore Equipment Financing

Even if you don’t have existing assets, you can use the equipment you’re buying as collateral for the loan.

How it works:
The lender owns the equipment until the loan is paid off — if you default, they repossess it.

Pros:

Collateral built into the loan
Easier to qualify for than unsecured loans

Cons:

Restricted to equipment purchases
May require a down payment

6. Try Invoice Financing or Factoring

If your business invoices clients with payment terms (e.g., net 30 or 60 days), you can use those invoices as collateral.

How it works:
Lenders advance 70–90% of your invoice value upfront, then collect payment directly from your customers.

Pros:

No physical collateral required
Approval based on your customers’ credit, not yours

Cons:

Fees reduce total profit
Works only for B2B businesses

7. Work With a Community Development Financial Institution (CDFI)

CDFIs are nonprofit lenders focused on helping small businesses, especially those without assets or credit history.

They often provide:

Low-interest microloans
Flexible qualification criteria
Free mentoring and training

Examples: Accion Opportunity Fund, LiftFund, Community Reinvestment Fund (CRF)

Pros:

Relationship-based lending
Mission-driven, not profit-driven

Cons:

Smaller loan amounts ($5,000–$100,000 typical)
May require extra paperwork

8. Consider Revenue-Based Financing (RBF)

RBF lenders approve funding based on future sales projections rather than collateral or credit.

You repay a fixed percentage of your monthly revenue until the total amount plus fees is paid back.

Pros:

No personal or business assets required
Payments scale with your income

Cons:

Costlier than traditional loans
Only works for businesses with recurring revenue

9. Seek a Co-Signer or Business Partner

If your collateral or credit profile is weak, a co-signer with stronger financials can help secure better terms.

Pros:

Increases approval odds
Access to higher loan limits

Cons:

Shared liability — missed payments affect both parties

Tip: Formalize agreements in writing to protect both sides.