Secured or Unsecured UK Business Loans: Which Option Is Right for Your SME?

Summary: Deciding between secured and unsecured business loans depends on how much you need, how quickly you need it, the assets you can offer, and your credit profile. Secured loans (backed by business or personal assets) often deliver larger amounts and lower interest for longer terms but carry the risk of losing the asset if you default. Unsecured loans avoid asset pledges and are faster to arrange but usually cost more and have lower maximums. If you’d like personalised options, complete a quick, no‑obligation enquiry and receive matched quotes from lenders and brokers: Get Quote Now — Free Eligibility Check.

Quick at-a-glance

• If you need a large amount (from £10,000 upwards), or a longer term and can offer property or equipment, a secured loan or asset finance often delivers lower interest and higher borrowing limits.
• If you need working capital fast, don’t want to pledge assets, or need a short-term top-up, an unsecured loan or invoice finance may be better — expect higher rates and stricter affordability checks.
• Unsure which fits? Use our free eligibility check to get matched quotes from lenders and brokers who specialise in your sector: Free Eligibility Check.

What are “secured” and “unsecured” business loans?

In plain terms:

• Secured loans are backed by collateral — business assets (machinery, stock, vehicles), company property, or sometimes directors’ personal assets. Common forms include commercial mortgages, debentures, asset finance and some term loans. Because the lender has security, they may offer lower rates and larger amounts. However, security gives the lender rights to seize or sell the asset if repayments are missed.
• Unsecured loans have no specific asset taken as security. Approval relies on business cashflow, trading history, and creditworthiness. Examples include unsecured term loans, some overdrafts and merchant/online lenders’ short-term facilities. They tend to be faster to arrange but are typically pricier and capped at lower amounts.

Typical lenders: high-street and challenger banks, specialist asset finance companies, invoice finance providers, and online/merchant lenders. Broker panels can identify which providers are best placed to consider your business case.

Pros and cons: side-by-side

Representative cases: A manufacturer buying a new CNC machine may opt for asset finance or a secured term loan; a seasonal retailer needing a quick stock top-up may prefer an unsecured working capital loan or invoice finance.

How lenders assess risk and why security matters

Lenders underwrite using a mix of qualitative and quantitative factors:

• Trading history and turnover
• Profitability and margins
• Cashflow forecasts and bank transaction history
• Sector risk (eg. construction vs professional services)
• Credit profiles of both business and directors
• Value and quality of assets offered as security

Security reduces lender risk. If you can provide high-quality collateral (property, machinery with resale value), lenders are often happy to offer larger sums at lower rates. Without security, lenders price the higher risk into interest rates and fees — or limit lending amounts.

Which option suits your SME?

Answer these questions to guide you:

1. How much do you need and for how long?
2. Do you own assets you can or want to pledge?
3. How quickly do you need funds?
4. What is your recent trading and credit history?

Use-cases

• Growth capital or premises: Secured lending or commercial mortgage often best if you need large sums and long terms.
• Equipment purchase: Asset finance (a form of secured lending) lets you match repayments to asset life and protect cashflow.
• Short-term cashflow gaps: Unsecured working capital, invoice finance, or merchant lending can be faster — invoice finance unlocks unpaid invoices without pledging property.
• Poor credit or limited trading history: Secured options or specialist lenders may consider your case; expect higher costs and the possible need for director guarantees.

Decision checklist: amount needed; term; assets available; urgency; credit status; sector risk. If unsure, get tailored guidance and quotes: Get Quote Now.

Cost comparison, typical rates and repayment examples

Exact rates depend on lender, term, security and sector. Below are indicative ranges only:

• Secured loans (illustrative): from low single-digit margins over base rates for strong security to mid‑single digits for smaller businesses — often lower than unsecured options.
• Unsecured loans (illustrative): typically higher — commonly from high single digits up to 20%+ APR for short-term providers or riskier profiles.

Illustrative examples (indicative only):

• £50,000 unsecured loan over 3 years at a 12% APR — approximate monthly repayment: around £1,666 (this is illustrative; actual offers vary).
• £150,000 secured loan over 5 years at a 6% APR — approximate monthly repayment: around £2,899 (illustrative).

Rates, fees (arrangement, valuation, legal), and early‑repayment terms all affect total cost. For personalised, up‑to‑date quotes, complete our short enquiry: Free Eligibility Check.

How to choose: a step-by-step decision & application checklist

1. Define purpose and timeframe for the funds.
2. Review cashflow forecasts and affordability.
3. List assets you’re willing to pledge and get rough valuations.
4. Prepare recent accounts and bank statements.
5. Compare lender quotes: APR, fees, term, security and early repayment costs.
6. Read terms carefully and consider independent advice for significant secured borrowing.

Start your enquiry and get matched to lenders/brokers who specialise in your sector: Get Started — Free Eligibility Check. The enquiry is informational only — it is not an application.

How UK Business Loans helps

UK Business Loans connects SMEs to lenders and brokers so you can compare suitable funding options quickly. Our typical process:

1. Complete a short enquiry (takes under 2 minutes).
2. We match your details to lenders and brokers who specialise in your need and sector.
3. You receive contact and quotes — often within hours.
4. Compare offers, ask questions, and choose the best fit. There’s no obligation to proceed.

We do not provide loans ourselves; the enquiry form simply helps us match you to the most appropriate providers. Ready to compare personalised options? Get Quote Now.

For background reading on loan types and support, see our business loans overview page: business loans.

Quick pre‑application checklist

• Most recent annual accounts (or management accounts)
• 3–6 months’ business bank statements
• Cashflow forecast or brief business plan for larger loans
• List and valuation or quotes for assets (if seeking secured/asset finance)
• Director ID and recent personal credit information (if personal guarantees may be required)

Having documents ready speeds up lender decisions and allows you to get better, faster quotes.

Frequently asked questions

Will a business loan affect my personal credit?

Some loans require director personal guarantees or are recorded against personal credit; others are business-only. Check lender terms and ask before you apply.

Can I get an unsecured loan with poor credit?

Unsecured borrowing is harder with poor credit. Specialist lenders and secured options may still consider your business, but expect higher costs or guarantees.

If I offer property as security, what could happen?

If you default, the lender has legal rights to enforce the security, which can include repossession or sale — make sure you understand terms and seek advice if unsure.

How long does it take to get a quote via UK Business Loans?

After you submit a short enquiry, lenders or brokers will typically contact you within hours to a few days depending on complexity.

Is the enquiry form an application?

No — it’s an information form to help us match you with suitable lenders and brokers. Submitting it does not commit you to borrowing.

Author & date

By UK Business Loans Content Team — Published: 2025-10-31 — Updated: 2025-10-31. For more about us, visit our About page or read our terms and privacy policy.

Important: UK Business Loans introduces businesses to lenders and brokers. We do not provide loans ourselves and the enquiry form is for matching purposes only — it is not an application. Loan amounts we commonly arrange start from £10,000 upwards. Lenders and brokers may contact you with personalised quotes; please read their terms before applying.

1) Secured or unsecured business loans — which is better for my SME?
It depends on how much and how long you need to borrow, what assets you can pledge and your credit profile: secured loans suit larger, longer-term borrowing with lower rates, while unsecured loans are faster and better for short-term working capital but tend to cost more.

2) How much can I borrow with a secured business loan in the UK?
Secured lending commonly starts around £10,000 and can extend to hundreds of thousands or millions depending on the value of the collateral and the lender’s criteria.

3) How quickly can I get funds from a business loan?
Unsecured and online lenders or invoice finance can often deliver funds within days, whereas secured loans usually take longer due to valuations, underwriting and legal work.

4) Will a business loan affect my personal credit?
Some business loans require director personal guarantees or are recorded against personal credit files, so check lender terms before applying if you’re concerned about personal credit impact.

5) Can I get a business loan if my credit is poor?
It’s more difficult, but specialist lenders, secured options or broker introductions may still provide funding—typically at higher cost or with guarantees.

6) What documents do I need to apply for a UK business loan?
Have recent annual or management accounts, 3–6 months of business bank statements, a cashflow forecast or business plan for larger loans, ID for directors and valuations/quotes for assets if seeking secured finance.

7) What interest rates should I expect for secured vs unsecured loans?
Indicatively, secured loans often attract low-to-mid single-digit margins for strong security, while unsecured loans typically range from high single digits up to 20%+ APR depending on risk and provider.

8) Will lenders ask for personal guarantees on small business loans?
Many lenders may request director personal guarantees—especially for unsecured borrowing or weaker credit histories—though secured loans rely on asset security rather than guarantees in many cases.

9) Is invoice finance a better option than an unsecured loan for cashflow gaps?
Invoice finance can be an efficient alternative because it unlocks cash tied up in unpaid invoices quickly without pledging property, making it a good short-term cashflow solution for many SMEs.

10) How does UK Business Loans help me find the right loan?
UK Business Loans matches your quick, no‑obligation enquiry with trusted UK lenders and brokers who specialise in your sector so you can receive tailored quotes and compare options.