When you’re running a business, access to the right kind of finance can make all the difference. Whether you’re expanding, upgrading equipment, or managing cash flow, business loans can provide a much-needed boost. But before you apply, you’ll need to choose between secured and unsecured business loans — and the best option depends on your situation.
In this guide, we’ll break down the differences between secured and unsecured loans, explore their pros and cons, and help you decide which suits your business needs.
Table of Contents
- What Is a Secured Business Loan?
- What Is an Unsecured Business Loan?
- Key Differences at a Glance
- How to Choose: Factors to Consider
- Which Loan Type Suits Different Business Needs?
- Need Help Deciding?
What Is a Secured Business Loan?
A secured loan is a loan backed by an asset — commonly referred to as collateral. This could be business equipment, vehicles, commercial property, or even your home (if you’re a sole trader or director guaranteeing the loan).
Because lenders have a fallback option if you default, secured loans typically offer:
- Lower interest rates
- Longer loan terms
- Higher borrowing limits
However, there is a risk — if you can’t repay the loan, the lender can repossess the asset used as security.
What Is an Unsecured Business Loan?
An unsecured loan doesn’t require any collateral. Approval is based largely on your business’s credit history, cash flow, and trading performance.
Unsecured loans usually:
- Offer faster approval times
- Require less documentation
- Come with higher interest rates and shorter terms
- Have lower maximum loan amounts compared to secured options
Lenders may still ask for a personal or director’s guarantee, especially for new or smaller businesses.
Key Differences at a Glance
| Feature | Secured Loan | Unsecured Loan |
| Collateral required | Yes | No |
| Interest rates | Generally lower | Generally higher |
| Loan amount | Higher limits | Lower limits |
| Approval time | May take longer | Often quicker |
| Risk to business assets | Asset may be repossessed if unpaid | No asset risk (but may affect credit) |
How to Choose: Factors to Consider
Choosing between a secured and unsecured loan depends on your goals, risk tolerance, and financial profile. Here are key factors to weigh:
1. How Much You Need to Borrow
- Secured loans are better for large investments, like buying equipment or vehicles.
- Unsecured loans are ideal for smaller, short-term needs like covering payroll or bridging cash flow gaps.
2. Speed of Funding
- Unsecured loans tend to have faster approval — helpful if you need funds urgently.
- Secured loans take more time due to asset valuation and documentation.
3. Willingness to Use Collateral
- If you’re comfortable offering business assets as security, a secured loan might save you money over time.
- If not, an unsecured loan avoids putting your assets at risk.
4. Your Business’s Credit and Financials
- Strong trading history and good cash flow improve your chances for both types.
- Newer businesses may need to rely on secured lending or personal guarantees for unsecured loans.
Which Loan Type Suits Different Business Needs?
Here’s a quick guide based on common business goals:
Best Uses for Secured Loans
- Purchasing expensive equipment or vehicles
- Expanding premises
- Funding major capital improvements
- Consolidating other debts at a lower rate
Best Uses for Unsecured Loans
- Bridging seasonal cash flow gaps
- Hiring staff for a short-term project
- Covering urgent repairs or supply costs
- Marketing campaigns or software subscriptions
Need Help Deciding?
Choosing the right type of business finance can save you thousands in the long run — but it’s not always straightforward. At Capital Plus Finance, we work with over 40 lenders to match you with funding that fits your business goals, whether you need secured equipment finance or a fast unsecured business loan.
Let us help you compare options, explain terms in plain English, and guide you through the application process from start to finish.
👉 Talk to Capital Plus Finance today and find the business loan that works for you.
About Capital Plus Finance
Based in Sydney and servicing businesses across Australia, Capital Plus Finance is a trusted equipment finance broker and business lending specialist. With access to a wide range of lenders and deep industry knowledge, we help SMEs find tailored solutions to grow and succeed. Learn more at capitalplusfinance.com.au.
