I have had a small business - contemporary furniture for over 10 years.
We have been approached and invited by a very well-known national manufacturer to represent them on our website and also be the exclusive distributor in our state. Up to this point, I have financed the business on my personal credit cards at 0% interest, but now the multiple payments are seriously interfering with the cash flow. I want to consolidate this start-up funding (about 115,000) and also get about 85,000 more for expansion of inventory, expansion and optimization of the website, advertising and promotion of the new account. I have perfect credit and have never made a late payment. The payment for $200,000 would be about $2500 on a 10 year term, which is less than half of what I am paying now in debt. Although I feel absolutely confident that the business will not fail, I do not want to put my home up as collateral. I feel that with my credit history, years in business and this new account that I have proven I am a good credit risk. The SBA and the bank I have used or 10 years want collateral. Am I crazy to think I can get this money without collateral? I told the bank manager that the 1st time a payment is late, I will sign the papers for the 2nd mortgage, but of course, that was not "within guidelines". Does anyone have any ideas? I am being presented with an incredible opportunity and I don't want to let it go by.

Every lender will ask for collateral. Banks look at cash flow as their primary source of repayment, collateral as their secondary source of repayment should the cash flow weaken or disappear. Finally they look at the guarantors as the third source of repayment so be ready to personally guaranty the loan.

Most SBA lenders want 100% coverage on the collateral. Some lenders will reduce that amount if the cash flow is really strong. In your situation, you can offer your inventory as collateral. That should amount to something. You'll have to make up the rest with some other asset. If you are reluctant to offer your home as collateral, try offering other assets like CDs, stocks/bonds, mutual funds as collateral.

I am sure you can find some small SBA lender in your area who will give you a loan without collateral. I know one such lender in California but they are looking for strong historic cash flow and since they are new and trying to establish their business, they are more flexible than the established banks. It'll take some legwork on your part (or call a commercial mortgage broker) to find that lender.

Good luck!

Specifically, the SBA asks for collateral for two reasons. One, it's a tax-payer funded program that works through a bank-guarantee program. Therefore, if you happen to default on the loan, the lender can go back to the SBA and petition for the return of the guaranteed portion. The SBA requires a due diligence process asking the lender to first tap into personal assets available before requesting government funds. In short, they want the borrower to be responsible first, then the SBA will assist. Second, if you place your home as collateral, there's less chance of fraud and greater encouragement for you to make the payments.

If you feel you should not have to pledge your home for collateral, you should explore conventional loan avenues. If your cash-flow, profitability, and credit are good, you might be able to get a regular business loan just requiring the pledge of business assets.

Not every lender requires collateral. If your company is profitable and you have good credit, I can help.

If your company has been in business >2 years, has been profitable, and you have over 700 credit, up to $250,000 is available.

I specialize in unsecured lines of credit. Call me if you want, I can explain more.

collatrel is basic need of all lenders ... other alternatives are not so good.

Not true. If you can prove profits for an extended period time, and you have good credit history, decent options are available without collateral. They are just less common.

How do you get a business loan if you have no collateral? I want to start my own business but don't have bad credit but I don't have the best either. What do I do? Get someone to sign with me???