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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 November 25th, 2017
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Product Description
Prospa Business Loan
From (variable)
$5,000
0.25 to 2 years
$250 establishment fee
Special offer: No repayments required until Monday 8 January 2018 for business loans that are settled between 20 November 2017 and 31 December 2017. Conditions apply.
NAB QuickBiz Loan
From 13.85% (fixed)
$5,000
1 to 3 years
$0
An unsecured business loan from $5,000 that can be processed in 1 business day.
Spotcap Loans
From (variable)
$10,000
1 year
$0
Take advantage of a fixed interest rate and no upfront fees on this business loan, available up to $250,000. Note: Business must have been operating for at least 18 months and have turnover over $200,000.
Moula Business Loan
From (variable)
$5,000
0.5 to 1 years
$0
Small business loans of up to $250,000 approved and funded within 24 hours. Transparent fees and rates. Note: Business must have been operating for at least 12 months and have monthly sales of at least $5,000.
GetCapital Flexible Business Loan
From (fixed)
13.18%
$5,000
0.25 to 1 years
1.5% to 2.5% initial draw down fee
A flexible business loan that allows you to earn Qantas rewards points. Note: Business must have been operating for at least 9 months and have monthly sales of at least $10,000.
Sail Unsecured Business Loan
From 15% (fixed)
$5,000
1 year
2.5% origination fee
Take advantage of a convenient business loan available from $5,000. Bad credit applicants considered. Note: Business must have been operating for at least 6 months and have turnover over $50,000.
RateSetter Business Loan
From 3.7% (variable)
10.01%
$10,000
0.5 to 5 years
0.5%
Apply for up to $150,000 and choose between a secured or unsecured loan. Note: Business must have been operating for at least 2 years and have turnover over $250,000.
businessloans.com.au  Flexible Business Loan
From (fixed)
$5,000
0.5 to 1 years
1.5% Initial draw down fee
A 100% online business loan with amounts available from $5,000. Flexible eligibility criteria and transparent rates and fees.

Compare up to 4 providers

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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