poppyThe key difference
A secured loan is backed by an asset, usually property, that the lender can sell if the loan isn’t repaid. An unsecured loan isn’t backed by a specific asset. Instead, the lender relies on your business’s cash flow and, usually, a personal guarantee from the directors.
Side by side
| Secured | Unsecured | |
|---|---|---|
| Security | Property or other assets | Usually a personal guarantee |
| Cost | Lower | Higher |
| Amount | Can be large | Based on cash flow |
| Term | Often years | Often months |
| Speed | Often weeks (valuations, legal work) | Often much faster |
| Paperwork | Financials, tax returns, valuation | Often bank data, ID and ABN |
What a personal guarantee means
If you sign a personal guarantee and the business can’t repay, the lender can ask you personally to repay the debt. A guarantee isn’t the same as security over your home, but it is a serious personal commitment. Read it carefully, and get advice if you’re unsure.
How to choose
- Choose secured if you’re borrowing a large amount over several years, you own property and you can wait for approval.
- Choose unsecured if the need is short-term, you don’t own property or don’t want to use it, or you need an answer quickly.
Whichever you choose, compare the total amount you’ll repay, including all fees.