Is It Hard to Get Approved for an Unsecured Business Loan?

Understanding Unsecured Business Loans

An unsecured business loan provides financing without requiring collateral such as equipment, trucks, or property. Because the lender takes on more risk, approvals are typically tighter than with secured loans.

Whether it’s “hard” to get approved depends on your credit, revenue, and time in business.

What Lenders Look For

To offset risk, lenders assess:

• Credit Score – 650+ is standard, 700+ is preferred.
  
  
• Revenue – Strong monthly cash flow proves repayment ability.
  
  
• Time in Business – Startups can qualify, but companies with 2+ years have an advantage.
  
  
• Debt Service Capacity – Your ability to handle the loan alongside existing obligations.
  
  

Why Approval Can Be Difficult

1. Higher Risk for Lenders

With no collateral, lenders rely heavily on your credit and revenue track record.

2. Lower Approval Amounts

Most unsecured loans cap between $10,000–$250,000. Anything higher usually requires collateral or a shift to an asset-based loan.

3. Stricter Requirements for Startups

Startups may face lower approvals unless they factor invoices or explore working capital loans.

4. Higher Costs

Rates often range from 8% to 25%, reflecting risk. This impacts affordability.

How to Improve Approval Chances

• Boost Credit – Pay down debts and avoid late payments.
  
  
• Show Consistent Revenue – Bank statements are crucial for lenders.
  
  
• Apply for the Right Amount – Don’t over-ask; request within your proven revenue capacity.
  
  
• Consider Alternatives – A line of credit or term loan may be easier depending on your profile.
  
  

Case Study: Two Businesses, Different Outcomes

Company A: Established construction firm in Ontario, $80k monthly revenue, owner credit 720. Approved for $200,000 unsecured loan with a 24-month term.

Company B: Startup logistics company with $15k monthly revenue, owner credit 610. Approved for only $25,000 unsecured, offered at higher rates.

This shows why some businesses find it straightforward, while others struggle.

FAQ: Is It Hard to Get Approved?

1. What credit score is required?
650 minimum, 700+ preferred.

2. Can startups get approved?
Yes, but amounts are usually smaller ($10k–$50k). Factoring or working capital loans may be better.

3. Is approval faster than secured loans?
Yes. Decisions often within 24–48 hours.

4. Do I need financial statements?
Yes — bank statements, revenue proof, and tax filings strengthen applications.

5. What if I have bad credit?
You may qualify for lower amounts at higher rates. Alternatives include asset-based lending.

6. Is it harder than secured financing?
Yes, because lenders can’t fall back on collateral.

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Final Thoughts

Getting approved for an unsecured business loan isn’t impossible, but it can be harder than secured financing. Lenders weigh credit, revenue, and time in business heavily.

Most Canadian businesses can qualify for $10,000–$250,000 unsecured, but the stronger your financial profile, the easier and cheaper approval becomes.

Want to see what you qualify for? Contact our credit analysts today for a tailored assessment.

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