Looking for a business loan that doesn’t tie up your real estate? Here’s a guide to eight different types of loans that don’t require you to sign a mortgage.

One in four businesses won’t make it through their first year.  More than 50% won’t see their fifth year. Of those businesses that fail, 82 percent report cash flow challenges.

It’s an old adage: “You need to spend money to make money.”  It proves true for small business. Sometimes you need cash for expansion, more equipment or better facilities. Maybe you need some inventory.

A loan is often the right answer. But what can you do if you don’t have a house to offer as collateral? Are there any other ways to fund your business without using your real estate?

Read on for different types of loans that don’t require a mortgage.

1. Collateralized Loans

If your business has been working for some time, you may have a large piece of equipment or a warehouse full of inventory that can act as a guarantee for the bank’s loan.

A common form of commercial and industrial financing is called a collateralized term loan. The lender gives you

These c&i loans provide a lump sum, which is repaid with interest over a fixed period.


• Quick process to fund through an online application rather than traditional bank methods

• About a week compared to several months

• Cash upfront to invest

• Usually more generous loan amount


Requires collateral – business equipment or inventory worth the amount you are borrowing

• The lender will seize and sell your collateral if you default

• Costs can vary; origination fees, interest rates, and payment penalties are different from loan to loan

Best uses:

• Business expansion

• Established business with a short-term cash need

This type of loan contrasts with the non-traditional micro lending format.

2. Microlending

Certain nonprofit organizations and lending groups offer small loans of $500 to $50,000 to special borrowers. These lenders are generally mission-driven and serve underrepresented communities, underserved minority groups, startups or other groups.


Low cost to borrower

• Makes loans not considered profitable to mainstream lenders

• Often includes business education, consulting and training


• Very specific eligibility requirements

• Small loan limits

• Documentation burden

Best use:

• Startups

• Founders from underserved minority groups

• Businesses serving disadvantaged communities

• Businesses needing only a small amount financed

For larger loans, or for businesses that do not qualify for microlending, the Small Business Administration offers some compelling services.

3. Small Business Administration Lending

These loans are made by banks and other lenders with the guarantee of the Small Business Administration. Variable loan terms are offered based on the use of the money. You can take up to seven years repayment for working capital. Equipment can be financed in a decade.


• Lowest rates typically at or below market

• Loan amounts up to $5 million

• Generous repayment terms

• Ongoing education and mentorship


• Many more applicants than funding

• Long qualification process

• Large documentation burden

Best uses:

• Established businesses expanding

• Refinancing existing business debts

• Long-term needs

If you have a need for faster funding, you may consider using your good credit.

4. Business Line of Credit

Business lines of credit give access to funds up to your credit limit. It is a revolving account, so as you pay back money, you can borrow it again and again. interest is due only on the money borrowed. It is much more flexible than other types of loans.


• Flexible amounts, borrow only what you need, when you need it

• Unsecured by collateral


• Can be costly

• Expect account maintenance fees and a charge with every draw

• Proof of revenue and good credit required

Best uses:

• Emergency or unexpected expenses

• Short-term financing needs

• Seasonal or limited term expenses

• Cash flow management

• Opposite to a line of credit taking advances on your income.

5. Cash Advances- Some Different Types of Loans

This type of financing involves taking an advance sum of cash upfront, then repaying through a portion of daily credit and/or debit card sales. You could also repay through daily or weekly direct debits from your business checking account.


• Speedy cash

• Completely unsecured lending


• Borrowing costs can up to 350%

• Lender repayment takes priority over any other cash needs

• Frequent repayments can create cash flow problems

Best uses:

• Businesses with frequent credit card sales

• Emergency financing

This is the business equivalent of payday lending. It really is the last resort for financing. A better choice is smart use of your Accounts Receivables.

6. Accounts Receivable Factoring

Factoring is the sale of invoices due to you. Usually, your customers pay within 30, 60 or 90 days. If you cannot wait that long, you sell those debts to a factoring company. They give you cash, then collect the debts themselves.


• Fast funding for your needs

• Easy approval based on the strength of your A/R


• More costly than a collateralized loan

• Debt collection goes to an outside service

Best uses:

• Businesses with good customers who buy on credit

• Seasonal cash needs

• Businesses with reliable client payments

Similar to factoring, Invoice Financing uses your unpaid invoices to secure funds.

7. Invoice Financing

This loan is a cash advance collateralized on the strength of your customers paying on time. The lender will only seize control of the debt if you fail to make your payments on time.


• Funds quickly

• Invisible to customers

• Not as expensive as other types of cash advances


• Expensive compared to other types of collateralized lending

• You must stay on top of customer debt

Best uses:

• Businesses with lots of unpaid invoices

• Need fast money

• Businesses need to maintain control of customer debts and terms

If you don’t have the type of business with a strong A/R, then Invoice Financing and Factoring won’t work.

8. Business Credit Cards

Credit cards you probably understand. It is a revolving line of credit that allows you to take and repay money so long as you need it, so long as you maintain the minimum monthly payment. The amount of debt is limited by your credit limit.

Business credit cards are usually used for small or inconvenient expenses such as office supplies, travel & entertainment or mobile phone service. often they are issued to key employees and have a strict transaction limit.


• No required guarantees

• Rewards points and discounts with some credit cards


• Not appropriate for large ongoing expenses

• High cost

• Prone to abuse

Best uses:

• Small, regular, and inconvenient expenses

• Trusted employees

Credit cards are probably your best understood and most familiar type of financing.

Choose Well and Wisely

Different types of loans are appropriate for different situations. Every business has cash flow challenges. Not every business has an owner willing to mortgage their home for funding. There are several other choices.

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