Not always. A bank loan usually wants something standing behind it: property or equipment pledged as collateral, the owner’s personal promise to pay, or both. Many working-capital and revenue-based programs read the business’s bank deposits instead of its assets, so a file can qualify without pledging a specific thing. The catch is price. Speed and flexibility typically cost more than a bank line.
What do collateral, a personal guaranty, and a UCC lien actually mean?
They are the three ways a funder protects itself if you don’t pay: a thing it can take, a person it can pursue, and a public claim on business assets that other creditors have to respect. Most agreements use at least one.
Collateral
Collateral is something of value you pledge to a lender, and if you don’t pay, the lender can take it and sell it to cover the debt. For a business that usually means real estate, vehicles, equipment, inventory, or money your customers owe you. A loan backed by collateral is called secured. A loan with nothing pledged is unsecured, and the lender is relying on your cash flow and your word.
Two things surprise owners. The lender does not count collateral at full value; it gets marked down to what a quick sale would bring, because a quick sale is what the lender is planning for. And pledging an asset does not mean handing it over. You keep driving the truck; the lender keeps a legal claim on it. That claim is called a security interest, and the state law that governs it is Article 9 of the Uniform Commercial Code, the “secured transactions” article, which Cornell’s Legal Information Institute publishes in full.
A personal guaranty, and how it differs from collateral
A personal guaranty is your own promise, as the owner, to pay the business’s debt if the business can’t. (“Guaranty” is the legal spelling you’ll see in the paperwork.) Collateral is a thing. A guaranty is a person. With collateral, the lender’s reach stops at the pledged asset. With a guaranty, it reaches you, not just the business, for whatever is still owed.
Owners often assume the guaranty is the rare ask. The data runs the other way. The Federal Reserve Banks’ 2026 Report on Employer Firms found that, among firms carrying debt, 59% had an owner’s personal guaranty securing it, while 51% had pledged business assets. So read the guaranty language first. Some guaranties are unlimited, meaning you owe the whole balance. Some are limited, meaning you owe a set share or split it with other owners. Which one you sign changes what a bad year costs you personally.
A UCC lien
A UCC lien is a public notice that a funder has a claim on some or all of your business assets. The funder files a short form, called a financing statement or UCC-1, with the secretary of state where your business is located. Under Article 9 as published by Cornell’s Legal Information Institute, filing that statement is the general rule for making a security interest hold up against other creditors, and the form needs only three things: your name as the debtor, the funder’s name, and an indication of the collateral covered.
That third item is where owners get caught. A filing can name one asset, like a specific machine, or blanket everything the business owns: receivables, equipment, vehicles, inventory. Many working-capital and revenue-based agreements file a blanket UCC even when nobody asked you to pledge anything. It is standard paper, not a trick. But know it is there, because the next funder will see it. NerdWallet’s explainer on UCC filings puts it plainly: lenders are hesitant to take second position on a company’s assets, and an active filing can mean a no, or a smaller amount, elsewhere. When the balance is paid, the funder files a UCC-3 to terminate the lien. Confirm that it did.
Do banks always ask for collateral?
Usually, in one form or another: pledged assets, a personal guaranty, or both. Banks price money cheaply and lend it for long terms, and they answer to regulators for every loss. Collateral and the owner’s promise are how they cover the downside on a small file, and checking them takes appraisals, title searches, lien searches, and tax returns. That is why a bank loan tends to be the slowest money and the cheapest. If your bank can fund the file in time, take it.
The trouble is the calendar. The same Federal Reserve report found that 60% of employer firms applied for financing in the prior year, and the most common reason, at 56%, was meeting operating expenses. Payroll and rent do not wait for an appraisal.
How revenue-based underwriting reads deposits instead of assets
A revenue-based desk sizes the file on what the business brings in, not on what it owns. The underwriter reads recent bank statements and asks different questions. Are deposits steady month to month, or lumpy? What do balances look like at month end, not just at the peak? How many payments already come out automatically, and to whom? How long has the business been operating? Our companion guide on what underwriters look for in bank statements walks through each item.
Because the read is about cash flow, programs are sized to it: typically up to 2X monthly revenue, depending on how the file looks. A restaurant with steady deposits and no equity in its equipment can be a stronger file on this desk than a business with a paid-off building and erratic sales. “No collateral” does not mean “no recourse,” though. Many of these agreements still file a UCC, and many still ask for the owner’s guaranty, so ask. And a deposit read is only as good as the deposits. A weak stretch of statements is a weak file, whatever the balance sheet says.
What it costs you to skip collateral
Price, mostly. When nothing is pledged, the funder carries more of the risk, and speed and flexibility typically cost more than a bank line. We’re not the cheapest desk. Files that fit usually leave with a longer term and one payment instead of three — and you’ll know exactly what it costs before you sign anything. On the numbers: rates can start around 1% a month for the strongest files, depending on the file. Terms run out to 48 months at the ceiling — most files land 12–24. With revenue-based financing, the flexibility means the total repaid can run higher than a fixed-term bank product. Those are illustrative ranges, not an offer; the review desk’s read of your file is the answer.
How the four structures compare
| Structure | What secures it | What the underwriter reads | Typical speed |
|---|---|---|---|
| Bank term loan | Pledged business or personal assets, usually with the owner’s personal guaranty on top | Tax returns, financial statements, credit history, collateral value, time in business | Typically the slowest; appraisals and committee review take time |
| Equipment loan | The equipment itself; the lender holds a lien on it until the balance is paid | The asset’s value and resale market, plus the business’s ability to carry the payment | Typically faster than a general bank loan; the collateral is already defined |
| Working-capital program | Typically no specific asset; often a UCC filing and the owner’s guaranty | Time in business, monthly revenue, and the overall health of the file: deposit consistency, balances, existing payments | Decisions typically within one business day of a complete file |
| Revenue-based financing | Typically no specific asset; often a UCC filing; the remittance is a set share of future revenue | The size and steadiness of deposits, since the payment flexes with them | Decisions typically within one business day of a complete file |
What to ask before you sign
A desk that won’t answer these in writing has told you something.
- Is a lien being filed, and on what? One asset or a blanket filing. Get the answer in writing, and ask when the UCC-3 termination gets filed after payoff.
- Am I personally on the hook? If there is a guaranty, is it limited or unlimited, and does it end when the balance does?
- What is the total cost in dollars, and what is the payment? California’s Department of Financial Protection and Innovation now requires commercial-financing providers in that state to disclose the total funding amount, the annual percentage rate, the payment amount, the term, and the prepayment policy. Ask for the same five things anywhere.
- What happens if a payment is missed? The Federal Trade Commission’s small-business financing guidance says to ask the provider exactly that, along with whether the deal requires you to personally back it, and to insist on the answers in writing. Ask, too, whether the agreement includes a confession of judgment.
- Can I pay it off early, and what does that cost? Some structures give a discount for early payoff. Some do not.
Where Aglet fits
Our working-capital programs and revenue-based financing are read on the file — time in business, monthly revenue, the overall health of the statements — not on a pledged asset. Seeing your options takes two minutes and no documents; the sensitive steps, like bank statements and ownership details, happen only on the secure application or by phone, never by text or email. Qualifying files typically hear back within one business day of a complete file.
We’re not the cheapest desk. If a bank will fund the file in time, take the bank. If it won’t, the two-minute assessment shows what programs typically reach for a file shaped like yours, and the review desk will tell you plainly what yours supports.
Sources
- Cornell Legal Information Institute, Uniform Commercial Code Article 9 (Secured Transactions) — Article 9 governs security interests and collateral. Section 9-310(a) makes filing a financing statement the general rule for perfecting a security interest; Section 9-502(a) lists what a financing statement must contain: the debtor’s name, the secured party’s name, and an indication of the collateral.
- Federal Reserve Banks, 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey — Among firms with debt, 59% secured it with a personal guaranty and 51% with business assets; 60% of firms applied for financing in the prior year, most often to meet operating expenses (56%).
- Federal Trade Commission, “Back to business #3: Looking for small business financing?” (June 2021) — Advises asking whether a deal requires the owner to personally back it and what happens if a payment is missed, and insisting on answers in writing.
- California Department of Financial Protection and Innovation, commercial financing disclosure regulations effective December 9, 2022 — Providers must disclose the total funding amount, the annual percentage rate, the payment amount, the term, and the prepayment policy; covers installment loans, open-end credit, factoring, and merchant cash advances.
- NerdWallet, “What Is a UCC Filing?” (updated November 2025) — A blanket lien covers all of a business’s assets; lenders are hesitant to take second position behind an active filing; the lender files a UCC-3 to terminate the lien after payoff.