Secured vs unsecured business loans

Not sure if a secured or unsecured loan is more suited to your business needs? Find out in this guide.

If you’ve decided to apply for financing for your business, finding the right type of loan is an important next step. There is a range of loans available from banks and online lenders, but two of the most common business loan types are secured and unsecured loans. In this guide these two loans will be compared to help you decide on the best loan for your business.

What is the difference between secured and unsecured business loans?

The key difference between secured and unsecured business loans is the guarantee that is required – secured business loans require you to have assets, whether they be business or personal, to attach to the loan, while unsecured business loans do not.

Secured business loans are typically offered by banks and can help a business access larger amounts. This is because lenders are taking on less of a risk if they know they can recoup their losses should the loan not be repaid. Unsecured business loans tend to come with lower loan amounts and higher rates as the loan is more of a risk.

Unsecured business loans you can compare

Rates last updated May 28th, 2017
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
NAB QuickBiz Loan
An unsecured business loan from $5,000 that can be processed in 1 business day.
From 13.85% (fixed) $5,000 1 to 2 years $0 Go to site More
Prospa Business Loan
Apply for a business loan from $5,000 and enjoy a shorter loan term up to 12 months.
From (variable) $5,000 0.25 to 1 years $0 Go to site More
GetCapital Business Line of Credit Loan
A business line of credit that allows you to earn Qantas Aquire Points
From 0.75% (fixed) 13.18% $5,000 0.25 to 1 years Upfront fee of 1% Go to site More
Moula Business Loan
Small business loans of up $250,000 approved and funded within 24 hours. Transparent fees and rates.
From (variable) $5,000 0.5 to 1 years $0 Go to site More

What is considered a valuable asset?

When you’re borrowing against your assets, your loan is secured by the residual value that your assets represent. If you’re unable to repay the loan, the lender may seize your assets to cover the outstanding amount. Any of the following can be used as security:

  • Personal or commercial property
  • Vehicles
  • Valuable art
  • Business equipment
  • Appliances and valuable musical instruments

You can also borrow against the value of your business.

Is an unsecured or secured loan best for my business?

A secured business loan may be a good option for you if:

  • You’re looking to borrow a large amount of money
  • Your business is established and successful
  • You have several assets you can secure the loan against
  • You are in a position to make repayments over a long period of time

Secured business loans are usually granted by banks, but some alternative lenders also offer short-term secured loan options.

Your business can consider an unsecured business loan if:

  • You have a small- to medium-sized business with few or no valuable assets
  • Your business is relatively new in the industry
  • You need a quick cash injection
  • You can repay the loan over a period of three months to five years

There isn’t one right loan solution for all businesses, but by comparing your options and weighing up the pros and cons of each, you can find what’s right for you.

Picture: Shutterstock

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