Secured vs Unsecured Business Loans

Secured Business Loan vs Unsecured Business Loan: What is the difference?

Due to the competitive nature of the modern business landscape, having access to flexible financial solutions is key for businesses across the UK.

Depending on your business layout, different financial solutions may be better suited to your unique needs. Whether you’re looking to expand, invest in new assets or manage cash flow, understanding the difference between secured and unsecured loans can help you make the right choice.

At MAF Finance Group, we offer tailored solutions for both secured and unsecured loans, ensuring you have the flexibility and support you need to thrive.

What is a secured loan?

A secured business loan requires an asset (typically property) to be used as collateral to secure the funding, with an evaluation of the asset needed to be completed before the loan can be agreed.

Due to the asset evaluation, approval of a secured loan typically takes longer in comparison to an unsecured loan, with a reviewal necessary to determine whether the asset is suitable to be used as collateral.

The amount of capital that can be financed depends on the value of the property being used as security, with up to 75% of the value able to be obtained for the loan.

What is an unsecured loan?

An unsecured loan is a type of loan that is approved through the creditworthiness of the borrower, instead of using collateral. The size and repayment of an unsecured loan can vary, with amounts ranging between £10K and £2m, with term lengths typically between 3 months and 6 years.

As no collateral is provided with the unsecured loan, it is likely that a personal guarantee will be required.

An unsecured business loan may be an ideal solution for businesses who do not own any tangible assets. As there is no collateral involved, this type of loan is viewed as higher risk from the lender’s perspective.

What is the difference between a secured loan and an unsecured loan?

Collateral: Secured loans require a property to be used as collateral, while unsecured loans do not require any collateral, and approval is based on creditworthiness.

Risk: Secured loans are considered lower risk for lenders because they have the collateral as security, meaning if the borrower does not have the funds to repay the loan, the lender can sell the asset to recover the funds.

Approval Time Length: Secured loans take longer to approve in comparison to unsecured loans. As secured loans require an asset inspection, securing the loan may take longer, whereas an unsecured loan has a quicker approval process.

Loan Amounts: Secured loans often allow for larger loan amounts because they are backed by valuable collateral, while unsecured loans usually offer smaller loan amounts, linked to the borrower’s creditworthiness.

Repayment Terms: Secured loans typically offer longer repayment terms, giving borrowers more time to pay off the loan, while unsecured loans often come with shorter repayment periods.

Why should I choose a secured loan?

If your business needs access to funding and has valuable assets available that can be used as security, a secured loan is a great option. Secured loans give businesses access to competitive interest rates and high loan amounts, providing the necessary business capital to be more cash sustainable, fund new investments, and finance projects that can help the business grow.

Why should I choose an unsecured loan?

If your business requires a funding solution, but does not have access to high value assets, or does not want to have to use their assets as collateral, an unsecured business loan is an ideal solution. Through the quick application and approval process, you can gain access to flexible finance that can be used for day-to-day business operations or to fund new projects.

How MAF Finance Group can help you?

MAF Finance Group work with panel of banks and funders to ensure the most flexible and competitive financial solutions are available to you.

If you would like to know more about our financial solutions to identify which is right for you, or if you would like to get a quote, our specialist team of financial experts will be happy to help you.