Is it Possible to get a loan Without Providing Personal Guarantees or Real Estate as Collateral?

Although many entrepreneurs avoid debt because of the uncertainty of their future cash flows and the increased risk of bankruptcy associated with debt, there are some advantages of debt. For example, taking on debt does not dilute the entrepreneur’s stake in the company, and therefore he or she is able to maintain the same level of control. Also, the interest on debt is tax deductible, whereas dividend payouts are not.

Getting a loan, however, is difficult for a new venture. Most banks will want collateral or personal guarantees, and will also want to see that the company is making sufficient profit in order to meet monthly payments of interest and principal.  This can be a daunting challenge for most companies, particularly those with minimal fixed assets such as land and building. Some venture capital firms have relationships with banks that specialize in “venture debt”; these VC firms are often able to use these relationships to arrange loans for their portfolio companies. Other early stage companies have to make do by borrowing from individuals or companies that specialize in providing loans to small businesses.

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