Did you know that 85% of loans made to small businesses originate through banks, according to the National Federation of Independent Business? They can come in many shapes and forms, but if you have a particularly good credit history and rating you might consider unsecured small business loans. While this form of loan is sometimes more expensive to originate, as it carries more risk to the lender, if you have a solid track record and are not overly extended by your current credit lines, then you could well find a sympathetic ear to help you move forward in this way.

Unsecured small business loans are generally discussed when the amount in question is less than $150,000. Consequently, these are fairly simple to originate and unsecured small business loans can be arranged really quickly. As you might imagine, unsecured small business loans are essentially made in return for your reputation, and your signature on the document is the true promise of repayment.

In the case of a new business, you would personally need to guarantee these loans. In order to qualify you must have a credit score (also known as FICO) of more than 700, and your personal balance sheet must not show that you are overextended. Specifically your use of credit will be scrutinized and you should not have more than 50% of your available credit lines “tied up” at the time of application. In other words, if you have $20,000 of available credit, you should not have more than $10,000 in outstanding funds, owed to the originating companies. As your business moves forward and establishes its own credit history, the personal guarantee will become superfluous and in future you could attain unsecured small business loans by reference to your business credit by itself.

Many people will think twice before they sign over their major personal assets as collateral for a new business venture – and rightly so. After all, are you prepared to lose your home in the event of default on your business loan? With unsecured small business loans, your personal assets do not come into the equation, only your business or personal credit. Nobody likes to think about business failure, but it’s much better to sacrifice your credit standing in these cases, rather than your home itself.

It’s a very good idea to critically analyze your plans before applying for an unsecured small business loan, though. Your revenue projections should be able to absorb the interest rates associated with the loan, as these will invariably be higher in comparison to their secured counterparts. With unsecured small business loans, your interest rates will range between six and 25% and generally speaking, these are amortized over a shorter period. Normally, your amortization period is between five and seven years. Unsecured loans are typically more costly, but look at it from the bank’s perspective and realize that they are taking a much higher risk in this type of venture.

If you have plans for expansion and have carefully looked at these logically, with good thought process and projection, unsecured small business loans can be just perfect. If you need funds relatively quickly, these are ideal and they will of course leave your significant assets untouched. Then, for example, you can always look at getting a secured loan in future if you need more funds, and have numerous options available to you.