Business Loans
Securing funding for your business
Business Loans: Unsecured vs. Secured Funding Options
Business loans are a popular way to secure funding, whether on an unsecured or secured basis. Secured loans require collateral, such as residential or commercial property, whereas unsecured loans do not.
For businesses without tangible assets, business loans provide an excellent way to raise capital. They are available to both limited companies and sole traders, though lenders may require a personal guarantee. Businesses can secure funding through first-charge or second-charge loans, depending on their financial needs.
Unsecured Business Loans
Unsecured business loans allow businesses to borrow money without pledging specific assets as security. These loans are primarily approved based on creditworthiness, financial history, and overall business performance.
Key Features of Unsecured Business Loans
No Collateral Required – Businesses do not need to pledge property, equipment, or inventory as security.
Credit-Based Approval – Lenders assess the business’s credit score, financial stability, and trading history to determine eligibility.
Flexible Usage – Funds can be used for working capital, expansion, inventory, marketing, or unexpected expenses.
Higher Interest Rates – Due to the lack of collateral, unsecured loans typically have higher interest rates compared to secured loans.
Loan Amounts & Terms – Funding ranges from £10,000 to £2 million, with variable repayment structures based on the lender’s terms.
Fast Approval Process – Without collateral assessment, unsecured loans are often approved more quickly, making them ideal for businesses needing immediate funding.
Personal Guarantees Required – Most lenders require a director’s guarantee, meaning the business owner is personally liable for repayment.
Available to Limited Companies & Sole Traders – Ideal for businesses that lack physical assets but require fast and flexible funding.
Secured Business Loans
Secured business loans require businesses to provide collateral, such as residential or commercial property, to secure financing. This reduces the lender’s risk, often resulting in lower interest rates and higher borrowing limits.
Key Features of Secured Business Loans
Collateral-Backed Security – Loans are secured against assets, typically property, inventory, or equipment.
Higher Loan Amounts – The amount available is based on the value of the collateral, with funding from £10,000 up to £2 million.
Lower Interest Rates – Secured loans typically come with reduced interest rates since the risk to lenders is lower.
Flexible Loan Terms – Repayment terms vary, with options for fixed monthly payments, interest-only periods, or balloon payments.
First and Second Charge Loans Available – Businesses can opt for first-charge or second-charge financing, depending on existing debt obligations.
Risk of Collateral Loss – If the business defaults, the lender has the right to seize and sell the pledged collateral.
Application Process & Documentation – Lenders require detailed documentation, including financial statements, business plans, and asset appraisals.
Available to Limited Companies & Sole Traders – Suitable for businesses with valuable assets looking for cost-effective financing options.
Which Business Loan is Right for You?
Both unsecured and secured business loans offer tailored funding solutions for SMEs, startups, and growing businesses. If you require fast funding without collateral, an unsecured business loan may be ideal. However, if you have valuable assets and need higher loan amounts with lower interest rates, a secured business loan is a cost-effective alternative.
At Liquid Corporate Finance, we specialize in tailored business finance solutions, helping UK businesses secure the funding they need. Contact us today to discuss the best financing option for your business.
If you would like to discuss how our Business Loan solutions can help fund your growth, simply contact us via the details below:
For more insights on funding options and financial solutions for UK businesses, visit UK Finance’s Business Finance Guide.
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