Loan basics
Secured vs unsecured business loans: how they differ and which suits you
Security changes how much you can borrow, what it costs and how fast you can be funded. Here is how secured and unsecured business loans compare.
- Reviewed by
- Kama Atcheson, Business lending specialist
- Published
- Last reviewed
- Reading time
- 6 min read
Key takeaways
- Unsecured loans rely on cash flow and usually a personal guarantee, not a specific asset.
- Secured loans use property or business assets as security, which usually means higher limits and lower cost.
- Many lenders move from unsecured to secured once the loan amount passes a threshold.
- Property security can help businesses with limited financials or past credit issues.
When you borrow for your business, one of the first questions a lender will ask is what the loan is secured by, if anything. The answer shapes almost everything else: how much you can borrow, what it costs, how long you have to repay and how quickly the funds arrive.
Unsecured business loans
An unsecured business loan is not tied to a specific asset. The lender relies mainly on your business’s cash flow and credit history to decide whether you can repay.
What to expect:
- Faster decisions, often using bank statement data rather than full financials
- Lower maximum amounts, usually linked to your monthly turnover
- Shorter terms and more frequent repayments, sometimes daily or weekly
- Higher pricing than secured lending, reflecting the lender’s risk
- A personal guarantee from directors in most cases
Some lenders also register a general security interest over business assets for larger loans, even if the product is marketed as unsecured. Check the product details.
Secured business loans
A secured loan is backed by an asset the lender can recover if the loan is not repaid. That is most often property, but it can also be vehicles, equipment or receivables.
What to expect:
- Higher limits, based on the value of the security
- Longer terms and lower repayments
- Lower pricing, because the lender’s risk is reduced
- More paperwork, including a valuation and legal documents
- Settlement that takes longer than unsecured funding, unless it is a specialist short-term product such as a caveat loan
Side by side
| Feature | Unsecured | Secured |
|---|---|---|
| Assessed mainly on | Cash flow and credit | Security, plus cash flow |
| Typical limit | Linked to turnover | Linked to asset value (LVR) |
| Cost | Higher | Lower |
| Speed | Often fast | Varies, specialist lenders can be fast |
| Paperwork | Lighter | Heavier |
| Guarantee | Usually required | Usually required |
Which suits you?
Unsecured tends to suit established businesses with steady deposits that need a moderate amount quickly, and owners who do not want to offer property.
Secured tends to suit larger amounts, longer projects such as acquisitions or property purchases, businesses that want lower repayments, and businesses whose financials or credit history would limit unsecured options.
That last point matters. Security can be the difference between being declined and being funded. A business with patchy paperwork but strong equity can often borrow more, and at a lower cost, than its financials alone would allow. Our guide to rate vs approval explains why.
Next steps
Use the security filter on Business Loans to compare options, or tell us about your situation and we will match you with lenders that fit.
Questions about this topic
Is an unsecured business loan really unsecured?
It is not secured against a specific asset, but most lenders take a personal guarantee from the directors. Some also register a general security interest over business assets, particularly for larger amounts.
What can be used as security for a business loan?
Common security includes residential or commercial property, vehicles, equipment, receivables and sometimes a general charge over all business assets.
Are secured business loans cheaper?
Generally yes, because the lender's risk is lower. But fees, term and structure matter too, so compare the total cost.
