Unsecured business loans in the UK: your complete guide
By Helm, Funding Specialist
- Unsecured loans do not require property or assets as security
- They are available from banks, online lenders, and alternative providers
- Costs are typically higher than secured loans
- Unsecured does not always mean guarantee-free
- Merchant cash advances are a popular form of unsecured funding
Not every business has property or high-value assets to offer as security for a loan. For these businesses, unsecured business loans provide a route to funding without the need for collateral.
This guide covers everything UK business owners need to know about unsecured business loans, including the different types, costs, and how to choose the right provider.
What is an unsecured business loan?
An unsecured business loan is any form of business finance that does not require you to pledge a specific asset (such as property, equipment, or stock) as security. If you default, the lender cannot seize a particular asset.
However, unsecured loans may still include a personal guarantee, which means you could be personally liable. Always check the terms carefully.
Types of unsecured business finance
Several types of business finance fall under the unsecured umbrella.
| Type | Typical Amount | Collateral | Personal Guarantee |
|---|---|---|---|
| Merchant cash advance | £10,000 to £300,000 | None | Not required |
| Unsecured term loan | £1,000 to £500,000 | None | Often required |
| Revenue-based finance | £10,000 to £300,000 | None | Not required |
| Business credit card | £1,000 to £25,000 | None | Not required |
| Business overdraft | £1,000 to £50,000 | None | Sometimes required |
| Peer-to-peer loan | £10,000 to £500,000 | None | Varies |
How much do unsecured business loans cost?
Unsecured business loans are typically more expensive than secured loans because the lender takes on more risk. Without collateral, they have less recourse if you default.
Costs vary widely depending on the type of unsecured finance. Merchant cash advances typically cost 15 to 40 percent of the amount borrowed. Unsecured term loans from online lenders typically charge 8 to 30 percent APR.
Eligibility for unsecured business loans
Eligibility varies by lender, but common requirements include:
- A UK-registered business
- At least 3 to 12 months of trading history
- Minimum monthly revenue (varies by lender)
- A business bank account
- Photo ID and proof of address
Unsecured vs secured: which is better?
Neither is inherently better. The right choice depends on your circumstances.
| Factor | Unsecured | Secured |
|---|---|---|
| Collateral required | No | Yes |
| Typical cost | Higher | Lower |
| Approval speed | Faster | Slower |
| Amount available | Generally lower | Generally higher |
| Risk to personal assets | Lower (unless PG) | Higher |
| Best for | Speed, convenience, no assets | Larger amounts, lower rates |
Frequently asked questions
Is a merchant cash advance an unsecured loan?
Yes. A merchant cash advance does not require any collateral or security. It is one of the most accessible forms of unsecured business finance.
Can I get an unsecured loan with bad credit?
Yes. Many alternative lenders, particularly merchant cash advance providers, approve businesses with poor credit based on their revenue performance.
What happens if I default on an unsecured loan?
The lender cannot seize specific assets, but they may pursue legal action. If a personal guarantee is included, your personal assets could be at risk.
How much can I borrow unsecured?
Amounts range from £1,000 to £500,000 depending on the lender, your revenue, and your business profile.