Unsecured business funding refers to loan products that are not backed (i.e. secured) by assigned collateral, such as equipment, properties, vehicles, mortgages, and so on.
Many borrowers – particularly small and mid-sized business owners –prefer unsecured business funding. This is because they may either not have enough business or personal assets, or they don’t want to have their assets under-valued; which is something that banks are sometimes known for doing. For example, a piece of industrial equipment that has a fair market value of $50,000 may only be valued at around $30,000 by banks. Banks may also not be a viable option if you need business funding fast for unexpected expenses.
Typically, banks don’t want to take ownership of secured collateral. That’s not their intent with the low evaluation practice. Rather, they want to protect themselves in the event of default.
Now that you know why many borrowers prefer unsecured business funding vs. secured business funding, the next question is: What are your unsecured loan options? Below, we highlight 3 possibilities.
Purchase Order Financing
Purchase order financing is when you essentially sell a purchase order to a lender, in return for cash – usually about 80% of the purchase order’s value. The lender gets paid directly by your customer when the invoice is due. They also keep the principal, interest and fees, and send you whatever may be left over.
There are some drawbacks of purchase order funding that you should be aware of before you move ahead with this option. Often, the loan period is very short (e.g. usually 90 days maximum), and your customers will be dealing with a third party instead of directly with you.
Some businesses are heading online to drum up business funding on peer-to-peer platforms. While this can work for some businesses, it may not really a viable option for most. Because competition is ferocious, and individual funding amounts are typically small, it can take months to generate the funding that most businesses need.
Working Capital Loans
At Mulligan Funding, we provide working capital loans that have reasonable and realistic repayment terms (up to a year), and our clients receive 100% of the cash within days of approval. We also welcome clients with less-than-great credit, and startups with a few months of credit history.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
*The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 22, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.