Quick answer
An unsecured loan is a loan with no specific asset, such as property or a vehicle, pledged as security. The lender relies on the business's cash flow and the borrower's promise to repay. In Australian business lending, unsecured loans usually still come with a personal guarantee from the directors, are sized from turnover, run over shorter terms, and cost more in total than a comparable secured loan.
Key points
- No property, vehicle or equipment is pledged against the loan
- A director's personal guarantee is still standard on most business loans
- Some lenders register a general interest on the PPSR even when no asset is named
- Business amounts typically run from $5k to around $500k, sized off turnover
Strip away the marketing and an unsecured loan is simple: you borrow without pledging a particular asset. There’s no mortgage over your property and no lien over a truck. If you stop paying, the lender has no specific item it can sell to get its money back.
Moneysmart defines it as a loan “for which no asset has been used as security”, and notes the cost is usually higher because the lender’s risk is higher. business.gov.au makes a similar point from the borrower’s side: an unsecured loan doesn’t put a pledged asset at risk, so the lender leans mainly on how healthy the business looks.
Does ‘unsecured’ mean nobody is personally liable?
This is where business borrowing differs from a credit card. Almost every unsecured business lender in Australia asks the directors, or the owner, for a personal guarantee. That guarantee doesn’t attach to a specific asset, but it makes you personally responsible if the business can’t pay.
Some lenders go a step further and register a security interest against the business on the PPSR, even though no asset is listed in the loan. Practically, that can mean another lender sees an existing registration when you next apply. It’s worth asking any lender, before signing, whether it registers anything and when it removes the registration after payout.
How unsecured and secured loans compare
| Unsecured loan | Secured loan | |
|---|---|---|
| What backs it | Cash flow and a personal guarantee | Property, vehicle, equipment or other assets |
| Typical business amounts | About $5k to $500k | Up to several million, depending on the asset |
| Usual terms | A few months to a few years | Often longer; years for property-backed loans |
| Speed | Often very quick for smaller amounts | Slower when property must be valued |
| Total cost | Higher | Lower for the same amount and term |
| Main assessment | Turnover, bank conduct, credit | Asset value and the ability to repay |
Our comparison of secured vs unsecured business loans goes further.
How lenders decide what to offer
With no asset to lean on, the lender looks hard at the account. Recent bank statements show turnover, regular deposits, how often the balance dips below zero and whether repayments to other lenders are already going out. Many unsecured products are priced with a flat fee or a factor rate instead of a traditional annual rate, and repayments often come out daily or weekly. A merchant cash advance is a related product, repaid as a share of card sales.
Banks also offer unsecured business loans and overdrafts, and when you fit their criteria they’re often very good value. Where a bank declines or its timeline doesn’t suit, a non-bank lender may be the next step.
Weighing up an unsecured loan? Tell us what you need and we’ll talk through whether security could save you money.
Example: total cost in dollars
A Newcastle electrical contractor with $900k annual turnover wants $60k to buy stock for two large jobs. Two offers come back:
- Unsecured, over 12 months, with weekly repayments: about $71k repaid in total, so roughly $11k in cost.
- Secured against the owner’s home, over three years: lower monthly cost, but more paperwork, a valuation and about two weeks to settle.
The contractor expects to be paid on both jobs within five months and plans to repay early. Because speed matters more than the long-run saving, the unsecured offer wins, after confirming the early repayment terms in writing. (Illustrative figures only; plug your own numbers into our unsecured business loan calculator.)
Related terms
Our main unsecured business loans page covers lenders, documents and limits in more detail. See also secured loan, personal guarantee and factor rate.
Need funds without putting up property?
Unsecured finance is often the quickest path for a trading business, and sometimes a little security makes it far cheaper. We’ll help you see both sides. The form is about sixty seconds of typing, and your credit score is left alone when you submit it. Your details aren’t broadcast to a long list of lenders; a person here reviews what you’ve entered and calls to talk options. Please be accurate about turnover and any existing loans, because that’s what lets us suggest the right product the first time.
Frequently asked questions
If a loan is unsecured, can the lender still take my house?
Not directly, because the house isn't security. But if you've signed a personal guarantee and the business defaults, the lender can pursue you personally for the debt, and that can eventually involve court action against your assets. Read the guarantee carefully before signing.
Why do unsecured business loans cost more?
Without an asset to sell if things go wrong, the lender carries more risk. It prices that risk into fees and interest, so the total amount repaid is usually higher than on a loan secured by property for the same amount and term.
How much can I borrow unsecured?
It depends on turnover, trading history and credit. As a broad guide, business lenders offer from about $5k up to around $500k unsecured, with the limit often linked to a portion of annual or monthly sales.
Do I need financial statements for an unsecured loan?
For smaller amounts, many lenders assess from bank statements, often connected securely online, plus ID and an ABN. Larger amounts usually need BAS, financial statements or tax returns.
Will an unsecured lender register anything on the PPSR?
Some do. A lender may register a security interest against the business on the PPSR, even though no particular asset is named in the loan. Ask before you sign, as it can affect future borrowing.