What’s a secured business loan?
A secured loan requires you to provide collateral – like your property, a car, or business equipment – as security. If you can’t repay the loan, the lender can take possession of the asset to cover the cost of the loan.
What’s an unsecured business loan?
An unsecured business loan allows you to borrow money without having to provide assets as collateral or 'security'. This means you don’t have to use any property, vehicles, or equipment to guarantee your loan.
Instead, lenders will look at the financial health of your business to determine whether you can repay the loan. Because the lender takes on more risk with an unsecured loan, the interest rates are often higher than a secured loan.
Secured vs unsecured business loans
Secured loans are usually used for larger, long-term investments, such as buying property, machinery, or expanding a business.
Unsecured loans are typically used for smaller loan amounts and short-term expenses.
Choosing the right business loan
When deciding which loan might be best for your business, it can help to consider:
- What will you use the loan for? If you’ve got a specific idea in mind, such as installing solar panels or buying a vehicle, you could explore a specialised option, like car & equipment finance.
- How long do you want to borrow the money for? An unsecured business loan might be suitable for short-term expenses. If you’re borrowing over a long time, a secured loan could be better option for your business, as interest rates are usually lower.
- Do you have assets you’re comfortable using as security? If you do, a secured loan might be worth considering. Most loans, like the BetterBusiness loan offer both unsecured and secured options, so you can tailor it to suit your needs.
