When your business needs funding—whether for expansion, equipment, or cash flow—one of the first decisions you’ll face is whether to apply for a secured or unsecured business loan. Both options can provide access to capital, but the right fit depends on your company’s financial position, available assets, and level of risk tolerance.

This guide outlines the key differences, potential benefits, and important considerations to help Australian business owners choose the loan structure that suits their goals.

What Is a Secured Business Loan?

A secured business loan requires the borrower to provide an asset as collateral. This might include property, vehicles, equipment, or other valuable business assets. If the borrower is unable to repay the loan, the lender may have the legal right to claim the asset to recover the outstanding debt.

Common uses:

• Purchasing commercial property
• Buying or upgrading equipment
• Funding long-term business growth
  
  

Typical collateral:

• Real estate
• Company vehicles
• Plant and machinery
• Accounts receivable
  
  

What Is an Unsecured Business Loan?

An unsecured business loan does not require collateral. Approval is typically based on the business’s financial health, trading history, and credit profile. Because there’s more risk to the lender, interest rates are often higher, and loan terms may be shorter.

Common uses:

• Covering cash flow gaps
• Hiring staff or launching marketing campaigns
• Short-term working capital
  
  

Eligibility usually depends on:

• Time in business (e.g. 6–12 months minimum)
• Consistent revenue
• Good credit history (business and/or director)
  
  

Key Differences at a Glance

Pros and Cons of Secured Loans

Pros:

• Access to potentially larger loan amounts
• Often lower interest rates due to reduced lender risk
• Longer repayment terms may be available
  
  

Cons:

• Requires asset valuation and legal paperwork
• Slower approval process
• Risk of asset loss if repayments aren’t met
  
  

Pros and Cons of Unsecured Loans

Pros:

• Quicker application process and potentially faster approval times
• No asset required as security
• Suitable for short-term or urgent funding needs
  
  

Cons:

• Higher interest rates
• Lower maximum loan amounts
• May require a personal or director guarantee
  
  

How to Choose the Right Option for Your Business

1. Assess your business goals
   Are you funding a major investment (like a warehouse or vehicle)? A secured loan may offer the structure and terms you’re seeking. For shorter-term needs or fast-moving opportunities, an unsecured loan could be more appropriate.
2. Review your financials and credit profile
   Lenders typically consider your revenue, cash flow, and creditworthiness. If your business is well-established and owns assets, secured finance may be more accessible. If you’re newer or don’t have available assets, unsecured options might offer a more suitable path.
3. Weigh the risks and flexibility
   Consider what your business can reasonably afford in terms of repayments, and whether you’re comfortable offering assets as collateral. Also assess how quickly you need the funds and what level of flexibility you require.

Need Help Comparing Options?

A finance broker can guide you through both secured and unsecured business loan options—assessing which structure fits your business, comparing lenders, and streamlining the paperwork. With access to a wide panel of banks and non-bank lenders, a broker can help you explore a range of solutions that align with your goals.

Final Thoughts

There’s no one-size-fits-all approach when it comes to business finance. Understanding the trade-offs between secured and unsecured loans can help you make an informed decision that supports your business’s long-term growth.

Whether you’re looking for quick access to capital or a structured investment loan, choosing the right loan type is an important step toward sustained growth.