Nothing Personal

How can you protect yourself and your assets from risk when securing a business loan?
Magazine Contributor
2 min read

This story appears in the February 2008 issue of Entrepreneur. Subscribe »

Question: I've heard about nonrecourse business loans that don't require the borrower to sign personally. What are these loans, and how can I get one?

Answer: A nonrecourse loan is just a fancy name for a secured loan in which the most you stand to lose if your business defaults is the property or assets you have put up as collateral. This means the lender can't come after you personally by garnishing your wages or by forcing you or your company into bankruptcy. While banks that lend to startups and small businesses typically require collateral as well as personal guarantees, which allow them to sue borrowers who fail to make payments, other types of lenders don't. For example, businesses willing to sell their receivables (the money customers owe them but have not yet paid) may be able to obtain nonrecourse loans from factors that provide short-term working capital, says Michael Espenshade, who often serves as a "virtual CFO" for early stage companies looking to raise capital.

Another alternative is a web-based marketplace, such as, that matches people who have money to lend with individuals and businesses that need to borrow money immediately. The borrowers can boost lenders' confidence and obtain lower rates by joining a Prosper group and keeping current on their payments. Although Prosper's loans don't require personal guarantees, they are limited to $25,000 and can carry interest rates as high as 26 percent for borrowers with low credit scores. Late payments are reported to credit bureaus, and delinquent loans are turned over to collection agencies. Says Espenshade, "Everything in life is a trade-off."

Rosalind Resnick is founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses. She can be reached by e-mail at or through her website,

More from Entrepreneur
Our Franchise Advisors will guide you through the entire franchising process, for FREE!
  1. Book a one-on-one session with a Franchise Advisor
  2. Take a survey about your needs & goals
  3. Find your ideal franchise
  4. Learn about that franchise
  5. Meet the franchisor
  6. Receive the best business resources
Discover the franchise that’s right for you by answering some quick questions about
  • Which industry you’re interested in
  • Why you want to buy a franchise
  • What your financial needs are
  • Where you’re located
  • And more
Whether you want to learn something new, be more productive, or make more money, the Entrepreneur Store has something for everyone:
  • Software
  • Gadgets
  • Online Courses
  • Travel Essentials
  • Housewares
  • Fitness & Health Devices
  • And More

Latest on Entrepreneur