Unsecured business loans
An unsecured business loan is a lump sum borrowed without pledging a specific business asset as security. The lender relies on trading performance and, in most cases, a director’s personal guarantee, and the loan is repaid in fixed instalments over an agreed term. It's quick to arrange and puts no single asset at risk, but usually costs more and advances less than a secured facility.
Founder & Managing Director, Muswell Rose, FundBiz
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind FundBiz. His background runs through commercial finance, mortgages and fintech, including as managing director of an invoice finance business. He oversees FundBiz's guides and lender reviews.
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At a glance
- What it is
- A loan with no asset pledged as security
- Based on
- Turnover, cash flow, credit profile
- Security
- Usually a director’s personal guarantee
- Speed
- Fast, no valuation or legal charge
- Trade-off
- Higher cost, lower advance than secured
- Scope
- Ltd companies, LLPs and partnerships of four or more partners
How an unsecured business loan works
You borrow a fixed amount and repay it in regular instalments, typically monthly, over an agreed term. No specific business asset is pledged, so the lender doesn't register a charge over property, equipment or invoices. Because there's nothing tangible for it to recover from if the loan isn't repaid, the lender bases its decision on the company’s trading strength and usually asks a director for a personal guarantee. That guarantee is the lender’s backstop in place of an asset.
The personal guarantee, explained
A personal guarantee is a written promise by a director or owner to repay the loan personally if the company can't. It sits outside limited liability, so if the business fails the lender can pursue the guarantor for the shortfall, usually up to an agreed cap rather than without limit. Most unsecured business loans include one, precisely because there's no asset behind the debt. Some directors take separate personal guarantee insurance to cover the exposure. If avoiding a guarantee altogether is the goal, read our page on the no personal guarantee options.
Unsecured vs secured: the real difference
The choice is a trade between speed and cost. Unsecured is quicker and risks no single asset; secured is cheaper and larger but ties up the asset and takes longer to arrange. The right answer follows the purpose of the money.
| Feature | Unsecured | Secured |
|---|---|---|
| Security taken | None; usually a personal guarantee | A charge over an asset or property |
| Typical cost | Higher, risk priced in | Lower, the asset reduces risk |
| Typical amount | Smaller, sized to affordability | Larger, sized to the asset value |
| Speed to arrange | Fast; no valuation | Slower; valuation and legal work |
| Best for | Working capital, short-term needs | Buying an asset or property |
Source: FundBiz product structure overview
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### How unsecured and secured business finance compare on the points that usually decide the choice. Positions vary by lender and deal. | Feature | Unsecured | Secured | | --- | --- | --- | | Security taken | None; usually a personal guarantee | A charge over an asset or property | | Typical cost | Higher, risk priced in | Lower, the asset reduces risk | | Typical amount | Smaller, sized to affordability | Larger, sized to the asset value | | Speed to arrange | Fast; no valuation | Slower; valuation and legal work | | Best for | Working capital, short-term needs | Buying an asset or property | Source: FundBiz product structure overview
If the purpose is a specific asset, asset finance is usually cheaper and easier to approve because the asset is the security. For a property purchase, a commercial mortgage fits better. For a fuller comparison, see our guide on asset-backed versus unsecured business loans.
What lenders look at
With no asset to fall back on, an unsecured lender scrutinises the fundamentals. Expect it to weigh:
- Turnover and how stable it's across recent months.
- Profitability and the cash flow visible in your bank statements.
- How long the business has traded, and the sector it operates in.
- Existing debt and how much of the cash flow it already absorbs.
- The credit history of both the company and its directors.
Recent business bank statements and filed or management accounts are the usual evidence, and open banking can replace paper statements to speed the process. A clear, factual explanation of the purpose and the repayment plan strengthens the application.
When unsecured is the right call, and when it isn't
Unsecured lending suits short-term or working-capital needs where speed matters and there's no obvious asset to secure against: a stock purchase, a marketing push, bridging a seasonal dip. It's less suited to large or long-term needs, where the higher cost of unsecured borrowing compounds and a secured facility would be materially cheaper. If the credit file carries adverse markers, an unsecured application is the hardest to approve; a secured or income-based route is usually more realistic. See our page on bad credit business loans for that situation, and our sister site MarketInvoice if the need is really about unpaid invoices.
Frequently asked questions
What is an unsecured business loan?
An unsecured business loan is a lump sum borrowed without pledging a specific business asset as security. The lender doesn't take a charge over property, equipment or invoices. Instead it relies on the company’s trading performance and, in most cases, a personal guarantee from a director. It's repaid in fixed instalments over an agreed term. Because there's no asset backing it, the lender’s decision leans heavily on turnover, cash flow and credit history.
Do unsecured business loans need a personal guarantee?
Usually, yes. Because the lender isn't secured on an asset, a personal guarantee is how it keeps the director aligned with repaying and bridges the protection of limited liability. The guarantee is a written promise to repay personally if the company can't, normally capped at an agreed amount rather than unlimited. If avoiding a guarantee is the priority, an asset-secured product where the security does that job is usually the better route.
How much can I borrow on an unsecured business loan?
The amount is driven by affordability rather than an asset value, so it turns on turnover, profitability, cash flow and credit profile. A common rule of thumb among lenders is to size an unsecured facility against monthly or annual turnover, but there's no fixed universal cap and every lender sets its own limits. A stronger, longer-trading business with clean credit will access more than a young or thinly capitalised one. The checker sizes the realistic range against your actual figures.
Unsecured or secured business loan, which is better?
It depends on what you're funding and what you can offer. Unsecured loans are faster to arrange and put no specific asset at risk, but tend to cost more, advance less and carry a personal guarantee. Secured facilities such as asset finance or a commercial mortgage are usually cheaper and larger because the lender holds real security, but they take longer and tie up the asset.
Match the product to the purpose: short-term working capital often suits unsecured; buying an asset or property suits secured.
How fast can an unsecured business loan be arranged?
Unsecured loans are generally among the quicker products to arrange because there's no asset to value or legal charge to register. Where documentation is ready and the business is straightforward, decisions can be quick and funds can follow soon after, though timescales vary by lender and by how clean the application is. Open banking data in place of paper statements can speed things up further. Secured products, by contrast, take longer because of valuations and legal work.
Can I get an unsecured business loan with bad credit?
It's harder, because an unsecured loan rests almost entirely on the credit file and trading record. Adverse markers such as CCJs or defaults narrow the pool of unsecured lenders and push up the cost. Where credit is weak, a secured or income-based product, such as asset finance, invoice finance or a merchant cash advance, is often the more realistic route because the security carries the risk the credit file otherwise would. See our bad credit page for the detail.
What do lenders look at for an unsecured business loan?
With no asset to fall back on, lenders scrutinise the fundamentals: turnover and its stability, profitability, cash flow through the bank statements, how long the business has traded, the sector, existing debt, and the credit history of both the company and its directors. They will usually want recent business bank statements and filed or management accounts. A clear, factual explanation of what the money is for and how it will be repaid strengthens the case.
Who can send an enquiry through FundBiz?
Our enquiry form is for UK limited companies, LLPs and partnerships with four or more partners. Sole traders are out of scope. For an unsecured facility, lenders focus on trading history, turnover, cash flow and credit profile. FundBiz does not run a credit check. If you send an enquiry, the broker or a lender may run their own checks, which can include a credit search, and they should tell you before they do.
Related finance
If the need is 3 to 18 months, see short term business loans; if it repeats, a revolving credit facility charges only for the days you draw; if the constraint is speed, see fast business loans; and business loan interest rates shows current published pricing with sources. Before you apply, the affordability stress test spreadsheet shows whether the repayment still fits if revenue falls or costs rise.
Will you be asked for a personal guarantee?
On unsecured borrowing the answer is usually yes. With no asset pledged, a director’s guarantee is normally how the lender keeps the decision-maker aligned with repaying.
A personal guarantee is a written promise by a director or shareholder to repay the facility personally if the company can't. It sits outside the protection of limited liability, which is precisely why it is worth understanding before you apply rather than at signing.
What changes the answer
- What stands behind the debt. Asset finance is secured on the asset being funded and invoice finance is advanced against the debtor book, so guarantees there are more often limited or waived.
- Trading history and filed accounts. A longer record of filed accounts and consistent turnover gives a lender more to underwrite without reaching for a guarantee.
- Facility size relative to the business. The larger the exposure against the company’s own numbers, the more likely a guarantee is asked for.
- Lender policy. This varies genuinely between lenders on identical cases, which is the practical argument for comparing rather than accepting the first offer.
What to check before you sign one
- Whether the amount is capped or unlimited, and whether it covers interest, fees and costs as well as the principal.
- If there's more than one director, whether liability is joint and several, meaning any one of you can be pursued for the whole amount.
- When the guarantee is released, and whether it survives repayment, refinancing or your leaving the business.
- How it interacts with any existing debenture or charge already granted to another lender.
A guarantee is a personal legal commitment. Take independent legal advice before signing one. FundBiz is not a lender and does not give advice: this is information only.
Check your unsecured finance options
Check your options →FundBiz does not run a credit check. Limited companies, LLPs and partnerships with four or more partners only.