Unsecured business loans explained

An unsecured business loan is a lump sum your company borrows and repays in regular instalments, without putting up a specific asset such as property as security. It is one of the most common ways for UK limited companies and LLPs to fund growth, stock, equipment or a gap in cashflow.

This guide explains how they work, what "unsecured" really means, and what lenders look at.

How an unsecured loan works

You agree an amount, a term and a repayment schedule with the lender. The money is paid into your business bank account, and you repay it, usually monthly, over the agreed term. Terms commonly range from a few months to around six years.

Repayments normally include both interest and part of the original amount, so the balance falls steadily. Some short-term lenders use a fixed fee or "factor rate" instead of an annual interest rate. Always ask for the total amount repayable so you can compare like for like.

What "unsecured" means in practice

Unsecured means the lender does not take a charge over a specific asset such as your premises. It does not always mean there is no security at all.

• Most unsecured business lenders ask for a personal guarantee from one or more directors. If the company cannot repay, the lender can ask the guarantor to pay. Our guide to personal guarantees explains this in detail.
• Some lenders register a debenture, a general charge over the company's assets, even on an "unsecured" product. Check the offer carefully.

Because the lender has less security, unsecured loans usually cost more than secured lending and are generally smaller.

What lenders look at

Every lender has its own criteria, but most look at the same core areas:

• Trading history: how long the company has been operating. Many lenders want at least 6 to 24 months, depending on the product.
• Turnover and profitability: shown in filed accounts, management accounts and bank statements.
• Bank conduct: how money moves through your account, your typical balance, and whether any payments bounce.
• Existing borrowing: other loans, advances and credit cards, and how much they cost each month.
• The directors: lenders usually run credit and identity checks on directors and guarantors.
• Sector: some lenders avoid certain industries or have extra requirements for them.

Our guide on how much your business can borrow sets out the turnover rules of thumb we use.

Costs to check

When comparing offers, look beyond the headline rate:

• Total amount repayable over the full term.
• Arrangement or completion fees, and whether they are deducted from the loan.
• Early repayment terms: some lenders allow early settlement with a saving on interest; others charge the full amount.
• Whether the rate is fixed or can change.

Our business loan calculator lets you see how amount, term and rate change the monthly repayment. It is illustrative only; your actual rate depends on your circumstances.

When an unsecured loan makes sense

An unsecured loan tends to suit a business that:

• Needs a known sum for a specific purpose, such as stock, a fit-out, marketing or hiring.
• Has steady income to cover fixed monthly repayments.
• Prefers not to tie borrowing to property.

If your income is seasonal or depends heavily on card sales, revenue-based finance may suit better because repayments flex with takings. If cash is tied up in unpaid invoices, invoice finance may be more efficient.

How quickly can it happen?

For smaller amounts, same-day decisions are often available up to £100,000, with funds typically following within a few working days once checks are complete. Larger loans, or cases with complex structures, take longer. Timings vary by lender.

How to prepare

You will usually be asked for recent business bank statements (often three to six months), your latest filed accounts, up-to-date management figures if the accounts are old, and director details for identity checks. Having these ready makes the process noticeably faster.

Next steps

You can get an indicative amount for an unsecured loan in a couple of minutes, with no obligation. Share your bank statements during the quote to see indicative rates. Figures are indicative only and subject to lender assessment and approval.