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differences between loan with collateral or without collateral

Getting a business loan without collateral security is not an easy task in Cambodia because most financial institutions will not simply allow the borrower to apply for a business loan without pledging any type of business assets on it. While many Cambodians want to take out loans for their business idea without taking their own risk at all, Khmer Prosperity Loan is here to teach you some useful ways of starting a business or personal trade in a low-risk way.

In this article, you’ll learn some of the importance of collateral and how a reputable financial institution treats it. Therefore, you will understand why loan providers are willing to offer collateral-free loans; we just need to imitate successful enterprise methods. Starting to explore the business loan without collateral security here.

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Type of Collateral When Getting A Business Loan In Cambodia

Banks and microfinance institutions provided credit loans worth $47 billion for 4.6 million Cambodians in 25 provincial and capital until 2022. Cambodians find it hard to get a business loan without collateral security. So, understanding a business loan without collateral security is helpful whenever you have to put any collateral on the line. Collateral, in the world of finance, refers to a valuable asset that a borrower pledges as security for a loan. It essentially acts as a guarantee for the loan providers. If the borrower fails to repay the loan as agreed, the loan provider has the right to seize and sell the collateral to recover the loaned amount.

common types of collateral

Here’s a breakdown of collateral and its types:

Types of Collateral:

  • Tangible Assets: These are physical collateral that can be easily possessed and sold. Whenever a business loan without collateral security is not applicable to you, then these are the examples:
    • Real Estate: This is the most common type of collateral, encompassing houses, buildings, and land used for mortgages.
    • Vehicles: Cars, trucks, and other motorized vehicles serve as collateral for car loans.
    • Equipment: Businesses may use machinery, tools, and other equipment to secure loans, which can be applied to agriculture financing and SME loans.
  • Intangible Assets: These are non-physical assets with value, but they might require specific procedures for claiming ownership in case of default. Examples include:
    • Securities: Stocks, bonds, and other financial instruments can be used as collateral.
    • Intellectual Property: Patents, copyrights, and trademarks can hold value and be pledged for loans.
    • Accounts Receivable: The money owed to a business by its customers can act as collateral.

Why Cambodians Love Collateral-Free Small Business Loans

the benefits of getting a business loan without collateral security

Owning a business in Cambodia is an exciting prospect, especially running it with a business loan without collateral security. It allows individuals to be their own boss, contribute to the economy, and potentially achieve financial success. However, starting or growing a business often requires an initial investment, which can be a hardship for many aspiring entrepreneurs. But a minimal capital of around USD 1000 is required to set up a business in Cambodia. This is where small business loans without collateral security come in. This makes them particularly attractive to Cambodians for several reasons:

  • Limited access to collateral: A new business owner’s asset is limited, especially those in the early stages, who might not have substantial assets to use as collateral for traditional loans, so a business loan without collateral security becomes their best partner.
  • Faster loan approval: Collateral-free loans often involve a simpler application process and quicker approval times compared to traditional loans requiring collateral valuation.
  • Reduced financial risk: Since the business loan without collateral security isn’t tied to personal property, the risk of losing assets in case of business failure is significantly lower.

How To Get a Collateral-Free Business Loan in Cambodia

differences between loans with collateral or without collateral

We understand Cambodians love to get a loan to start or even expand their business. While obtaining a collateral-free loan simplifies the process somewhat, loan providers who offer any business loan without collateral security still need assurance that you’ll be able to repay the borrowed amount. Here are some strategies to increase your chances of securing a collateral-free business loan in Cambodia:

Strategy 1: Craft a Compelling Business Plan For Business Loan Without Collateral Security

Think of your business plan as a persuasive document that convinces the loan provider you have a well-thought-out strategy and a viable business concept. Khmer Prosperity Loan concludes that the startup loans do require the documents below :

what is included in a business plan
  • Executive Summary (1-2 pages): This is your elevator pitch for getting any business loan without collateral security, summarizing your business’s essence and also proving that you have solid business financials. Briefly explain what your company does, the problem it solves, and its target market. Highlight the unique selling proposition (USP) that sets you apart from competitors.
  • Business Description (3-5 pages): This section covers the present in terms of your business. Elaborate on every component of your products and services, including characteristics and benefits to customers. What is the structure? Who is running this organization? Are there any unique ways or tools? Loan providers determine whether or not a business loan without collateral security fits its industry.
  • Market Analysis (2-3 pages): Make sure you engage in extensive research that will give you full knowledge concerning your target audience. Ascertain their demographics, their wants, how they buy and any trends pertaining to your field. Also, check out your rivals and how they relate to your strengths and drawbacks.
  • Marketing Strategy (2-3 pages): To clarify, how will you get in touch with your clients’ minds and entice them to pay for the product? This will require stating your marketing channels like publicity, advertising campaigns or social media. Besides, outline the strategy that you have come up with to improve sales, which also includes price techniques, distribution channels, and estimated sales.
  • Financial Projections (3-5 pages): In this part, you will see that your business is financially workable. Make realistic approximations of your revenue, expenses and profits for a specific period (normally between three and five years). State clearly the assumptions relied on in making projections and show how you are going to become profitable.

Crafting a professional business plan requires time and effort, and it’s a must to get a business loan without collateral security. Numerous resources are available online, including Khmer Prosperity Loan’s comprehensive blog post and through business development organizations in Cambodia to assist you in this process.

Strategy 2: Strengthen Your Creditworthiness

It’s difficult to get a small business loan without collateral security in the case of having a bad personal credit score, especially for small business owners with unstable businesses. So, building a strong credit history is essential for obtaining any loan, and collateral-free options are no exception. Here’s how to solidify your credit standing:

  • Obtain your credit report: Request your credit report from a credit bureau in Cambodia, like the Cambodian Credit Bureau (CCB). Regularly review it for any errors or discrepancies.
  • Dispute any inaccuracies: If you find incorrect information on your report, immediately contact the credit bureau and the creditor who reported the error to initiate a dispute resolution process.
  • Make timely payments: Develop a consistent habit of paying your bills, existing loans, and credit card balances on time. Late payments can significantly damage your credit score.
  • Manage your credit utilization ratio: This ratio indicates the amount of credit you’re using compared to your total credit limit. Aim to keep your credit utilization below 30% for a positive credit score.

Maintaining good financial habits and a responsible approach to credit will demonstrate your creditworthiness to potential loan providers, increasing your chances of loan approval.

Strategy 3: Leverage Alternative Forms of Security

While collateral-free loans eliminate the need for physical assets as security, loan providers might consider alternative options to mitigate risk from business loans that don’t require collateral to secure. 

Personal Guarantee: This is a formal agreement where the business owner takes personal responsibility for repaying the loan if the business defaults. This essentially puts the owner’s personal assets, such as savings or property, at stake if the business cannot repay the loan.

Points to Consider: Carefully evaluate the potential financial implications before signing a personal guarantee to get a business loan without collateral.

Guarantor with Strong Credit: Having an individual with a proven track record of responsible credit management co-sign on the loan application can strengthen your case. The guarantor’s good credit history assures the loan provider of an additional source of repayment in case of business failure.

Choosing a Guarantor: Selecting someone with a strong credit score and a steady source of income is really helpful for applying for unsecured business loans without providing collateral.

Ensure the guarantor understands the potential risks and responsibilities involved.

Strategy 4: Explore Alternative Funding Sources

Beyond traditional banks, several alternative financing options service to small businesses in Cambodia:

Microfinance institutions (MFIs): These institutions offer smaller loan amounts specifically designed for startups and micro-enterprises. MFIs often have flexible repayment terms and may place a greater emphasis on business potential rather than solely relying on credit history. As one of the most experienced microfinance institutions, Khmer Prosperity Loan promises that our clients can get funding without worrying because we offer you multiple loan options and any loan amount to apply for.

Angel Investors: These are wealthy individuals who invest directly in promising businesses. Securing angel investment requires a well-developed business plan and a clear understanding of the investor’s expectations. In this way, small and medium enterprises will not have heavy business debt because they are your partner but not debtors in this concept.

types of angel investors

Peer-to-Peer (P2P) Lending Platforms: These online platforms connect borrowers with individual loan providers. Interest rates on P2P loans can be higher than traditional options, but they may be suitable for smaller loan amounts and quicker approval times. This platform best fits owners who need a small-business loan without collateral. 

Even though there are many platforms that can achieve your goal of getting a loan for business without security, Khmer Prosperity Loan suggests you check carefully on the personal loan repayment, online loan schemes for startups, term loan tenure and other important terms that may cause a huge impact during your financing journey. You can also simplify the loan application steps for a business loan without collateral security by contacting us today.

Strategy 5: Build Strong Relationships with Loan Providers

Developing a rapport with potential loan providers can be advantageous throughout the loan application process.

Network with local business communities: Attend industry events, workshops, and conferences to connect with loan officers and representatives from financial institutions. 

Seek guidance from business advisors: Many organizations offer mentorship and support to small businesses, including assistance with loan applications. You can always visit the Khmer Prosperity Loan office or website to get a free consultation from us to understand how to secure the loan programs you need for your business.

Clearly communicate your business goals: When presenting your loan request, explain how the funds will be used to grow your business and demonstrate a clear journey towards profitability. It’s easy to get unsecured business loans from Khmer Prosperity Loan, just like sharing a business plan with a friend. In the meantime, we’ll give you the appropriate advice and loan approval. About 99% of micro and small enterprise applicants successfully get loan disbursement from us.

By establishing a positive relationship with loan providers, you can gain valuable insights into their requirements and potentially increase your chances of securing a favorable loan offer.

Types of Collateral-Free Business Loans in Cambodia

unsecured vs secured business loan

While the concept remains the same, collateral-free business loans in Cambodia can differ based on the loan provider, loan amount, and intended purpose. Here’s an overview of some commonly available options:

Microloans: Offered by MFIs, these loans can be applied as a business loan without collateral security and typically range from $500 to $5,000. They are ideal for starting a small business or financing specific needs like purchasing equipment or inventory. Repayment terms are usually shorter, ranging from 6 months to 2 years

Working Capital Loans: This loan is a financing that is designed to meet short-term operational needs. These loans can help cover daily expenses, manage payroll, and purchase supplies. Loan amounts can change depending on the loan provider but generally fall within the range of $5,000 to $25,000. Repayment periods are typically within 12 months.

Invoice Factoring: This involves selling your outstanding invoices to a financing company at a discounted rate. The company pays you a portion of the invoice amount upfront and then collects the full amount from your customers. This option can be beneficial if you have a steady stream of invoices but face a wait to receive payments.

how does invoice factoring work

Lines of Credit: Similar to a credit card, a line of credit allows you to borrow a specific amount as needed, up to a pre-approved limit. You only pay interest on the amount you utilize. This option provides flexibility for covering unexpected expenses or seasonal fluctuations in business activity.

These are the most common ways to need loans that don’t require collateral. Contact Khmer Prosperity Loan to start your new business without security. All you need to do is submit the required documents and wait for 24 hours to get approval for a business loan without collateral security.

Factors to Consider When Selecting a Loan Startup Business Loan Without Collateral 

Loan amount: Carefully assess your business needs and borrow only what is essential.

Interest rate: Compare rates offered by different loan providers and choose the one with the most favorable terms.

Repayment terms: Ensure the repayment schedule aligns with your business’s cash flow to avoid financial strain, especially long term loans like home loans with more than 30 years tenure.

Eligibility requirements: Meet the loan provider’s criteria, such as minimum business operation time, profitability, and creditworthiness.


Obtaining a business loan without collateral security in Cambodia opens doors for aspiring entrepreneurs and existing businesses seeking to grow. By following the strategies outlined above, strengthening your creditworthiness, and exploring alternative funding options, you can increase your chances of securing the financial resources needed to propel your business forward. Wait no more and contact Khmer Prosperity Loan for financial support. Our financial advisors are always ready to help your business with quick loan approval.

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Frequently Asked Questions (FAQs)

Q1. Can I get approved for a loan without collateral?

Yes, it’s possible to get approved for a loan without collateral in Cambodia, but eligibility criteria and terms may change among different loan providers.

Q2. What is a collateral free loan?

A collateral-free loan is a type of loan where the borrower isn’t required to provide any asset (such as property or vehicle) as security against the borrowed amount.

Q3. Can you borrow money without collateral?

Yes, borrowers in Cambodia can often obtain loans without collateral, depending on their creditworthiness and the policies of the lending institution.

Q4. What is collateral in a small business?

Collateral in a small business context refers to assets pledged by the business owner to secure a loan, providing the loan provider with a form of security against default.

Vannak Sen

Vannak Sen is Khmer Prosperity Loan's dedicated financial advisor. His expertise lies in guiding entrepreneurs through the loan process with ease. Vannak’s articles offer simple, actionable advice, helping your business navigate the financial landscape and thrive. For personalized, clear, and practical strategies that resonate with the Cambodian business community, rely on Vannak’s insights.

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