How to get a business loan without collateral

February 24, 2025

4 min

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Whether you’re launching a new business or trying to sustain and grow an existing one, access to financing is a crucial and difficult challenge. It’s difficult no matter your credit history or existing funds, but becomes a huge hurdle if you can’t bring collateral to a loan conversation.

Just like a mortgage, most lenders want some way to secure their investment and limit risk.

But there are exceptions and alternatives. In this article, we explore why banks ask for a deposit, the importance of collateral, and solutions for obtaining a loan without equity.

What is loan collateral?

Loan collateral is an asset that a borrower pledges to a lender as security for a loan. If the borrower fails to repay the loan, the lender can seize and sell the collateral to recover the outstanding amount.

Common types of collateral include:

Real estate (homes, land, commercial properties)
Vehicles (cars, boats, motorcycles)
Investments (stocks, bonds)
Cash accounts (savings, certificates of deposit)
Inventory & equipment (for business loans)

Collateral reduces the lender’s risk, often allowing borrowers to secure larger loans or lower interest rates.

Why do many banks require collateral?

Banks seek to reduce their exposure to financial risk. The requirement for a personal contribution from a small business owner is based on several principles:

Injecting your own funds into a project is proof of your seriousness and willingness to accept risk.
A deposit reduces the amount of loan required and therefore the risk for the lending institution.
An entrepreneur who contributes funds generally obtains a lower interest rate and more flexible repayment terms.
A company that is able to save before applying for finance reassures banks about its ability to manage its finances well.

Certain companies are more likely to obtain financing without a down payment. These are typically those with signed customer contracts, a solid business model or a positive banking history.

How can you get a business loan with no collateral?

While many traditional loans require some form of collateral (or very high interest and fees), there are a few alternatives to explore.

1. Government guarantees

In many countries, central banks or governments provide guarantees to banks on behalf of SMBs. For example, in France, Bpifrance offers guarantees that encourage banks to lend to entrepreneurs with no initial capital outlay. This scheme is particularly suitable for startups and young businesses with no existing revenue.

Check your local frameworks for similar opportunities.

2. AR and AP financing

If you’re already in business with a solid record of revenue coming in and out, modern lending providers offer some very advantageous options. Fintechs like Defacto provide financing without a down payment, by analyzing cash flow and unpaid invoices.

This is a great way to access the cash you’re due to receive in one, two, or three months now. Fees are very low, and the process is almost always quick and easy.

You get an immediate cash advance to bridge payment delays and finance operational needs without tying up capital. What's more, repayments are flexible, tailored to the company's level of activity, and no collateral is required.

This is ideal for SMBs and startups with irregular or very long cash cycles.

3. Crowdfunding and participative financing

Crowdfunding enables entrepreneurs to raise funds from the general public via online platforms such as Kickstarter, KissKissBankBank and Wiseed.

There are several models for this approach, tailored to the different needs of businesses:

Matching donations: contributors support a project in exchange for a product, service or exclusive experience. This model is particularly used for artistic, cultural and innovative projects.
Crowdfunding: This is a form of participative lending in which individuals or investors lend money to a company with staggered repayments and defined interest rates. This is an attractive alternative for SMBs wishing to avoid traditional banking channels.
Equity crowdfunding: In this model, investors receive shares in the company in exchange for their investment. It’s ideal for startups and fast-growing companies seeking capital while developing a community of ambassadors.

Crowdfunding is a flexible solution that lets you test a market, attract potential investors, and create a committed community around your project. But a successful crowdfunding campaign requires effective communication, a well-defined marketing strategy and a clear presentation of the project.

Tip: Take care with your presentation, set realistic objectives and mobilize your network to maximize your chances of success.

4. Business angels and private equity

Business angels and private equity funds are major players in the financing of fast-growing companies.

Business angels: These are individual investors who finance innovative startups and SMBs in exchange for an equity stake. They often provide strategic support, mentoring and a professional network.
Private equity funds: These structures invest larger amounts in companies in a growth or expansion phase. In return, they generally require active participation in the company's management and strategy.

This type of financing is particularly well suited to companies with strong growth potential and solid prospects for profitability in the medium and long term.

5. Leasing and factoring

These two are not really the same, but both give you access to the cash or equipment you need to build revenue right away.

Leasing: This solution makes it possible to acquire professional equipment in instalments, thus avoiding a high initial investment. It is particularly advantageous for companies with frequent requirements for technological, industrial or automotive equipment.

Factoring: A mechanism enabling companies to sell their trade receivables to a specialized organization in exchange for a cash advance. This avoids late payment problems and improves cash flow management.

Tip: By combining several financing solutions, such as leasing and factoring, you can optimize your cash flow and minimise the risks associated with late payment.

How can you optimize your application to maximize your chances?

Getting a loan with no deposit requires a well-prepared application. Here are the essential steps:

Prepare a solid business plan: A clear, detailed document that highlights the project's profitability and financial forecasts.
Maintain a strong banking history: A good credit score and sound financial management boost the confidence of lenders.
Present alternative guarantees: A deposit or credit insurance can replace the personal contribution.
Highlight partnerships and contracts: Committed customers or solid partners reinforce the credibility of the project.