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Advantages of unsecured loans over secured loans

PUBLISHED ON: 13/03/2024

Is an unsecured loan a good option for my business?

Unsecured loans and secured loans are both valuable forms of funding that support business cash flow and long-term growth. They are fundamentally different financial products, however, and some businesses find that unsecured loans are better for their needs.

It’s important to understand the implications of each type of borrowing, and our experts at UK Business Finance can talk you through the pros and cons of each. We understand the requirements of all lenders in the UK and will guide you towards the best deals regardless of the type of finance.

Unsecured loans can offer several important advantages over secured loans and may be the type of funding that your business needs to grow. They’re uncomplicated, flexible, and quick to access, so let’s look at these elements and advantages in more detail.

Why might an unsecured loan be better than a secured loan for your business?

No collateral required

If your business doesn’t own many assets, an unsecured loan can be a good option. If this is the case, the lender will sanction a loan based on other criteria, such as your trading and business credit history. Not owning assets isn’t a negative factor when looking for funding, especially if you can rely on a previous record of good financial management.

Quick to obtain

Unsecured loans can be obtained quickly when compared with secured loans. This is because the asset put forward on a secured loan needs to be professionally valued before the lending can be agreed upon.

In comparison, unsecured lending requires less paperwork to be provided and the lender uses other methods to decide whether to sanction a loan. These include checking your credit file and business books for evidence of good financial health and management.


You can use an unsecured commercial loan for a variety of purposes as long as they’re related to your business. These might include buying stock, for example, paying off debt, or stabilising cash flow so the business can operate with more certainty on a day-to-day basis.

They also offer flexibility in terms of repayment – they tend to be repaid over the short to medium term and there’s generally no penalty for repaying early if this suits your circumstances. Some lenders also allow overpayments so you can repay the loan faster.

Is your business eligible for an unsecured loan?

The typical criteria that you’ll need to meet to be eligible for an unsecured commercial loan are as follows:

  • Minimum turnover of approximately £3,000 per month
  • Healthy financial position with a good history of repayments
  • Registration as a UK business for a minimum of six months
  • Supportive documentation that demonstrates your business can afford to repay the loan – for example, sales and cash flow forecasts

UK Business Finance can help you find the right loan for your needs. We provide our services free-of-charge to clients and search the whole of the market for the best deals. Please contact one of the team for more information on how we can help.

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