Unsecured Business Loans

An unsecured business loan is usually a short-term type of business loan offered between 3 – 12 months. They do not require collateral, and the funds can be used for almost any business expense.

  • Fast access to finance through fintech lenders
  • No risk of using collateral - i.e. your home
  • Flexible use of funds
  • Higher rates and fees
  • May require a personal guarantee

Unsecured business loans are basically the same as secured business loans, with the exception that they don’t require security on the loan amount. This means that unsecured business loans are often much riskier to lenders than secured loans, as there is little chance of them recouping their losses in a bad situation.

The increased risk to the lender from lack of security is often reflected by shorter terms and high interest rates.

As there is no collateral on an unsecured business loan, they are often used by small businesses without any valuable assets – such as property – to offer. SME owners often also use unsecured business loans for the freedom in how they can use the funds for their business.

These loans are very popular with businesses looking to fund growth, access cash quickly, or with seasonal businesses.

Lenders will often charge higher interest rates that reflect the increased risk presented by borrowers not risking their personal or business assets.

Most lenders offer unsecured business loans. Some banks may offer them, including specific small business loans. You can also apply for an unsecured business loan online with a number of specialist lenders. These lenders offer the fastest approval speed in return for charging higher rates of interest.

Lenders will assess an application based on the monthly revenue of the business, its intended use for the loan, how the loan will benefit future business revenue, and more. Most lenders will be able to provide options if you have been trading for 12 months, have an Australian Business Number (ABN) and are registered for GST.

The minimum you will need to provide a lender with is your ABN and business bank statements. You may also be asked to provide a profit and loss statement, or access to your Australian Tax Office (ATO) Portal.

Generally, lenders will offer you a 12-month unsecured loan equal to your monthly revenue. I.e. if your business revenue is $50,000 each month, you will likely be approved for a $50,000 unsecured loan on a 12-month term.

However, depending on your risk profile, the capacity to service repayments, and the lender you apply with, you may be able to borrow between $5,000 and $600,000

Typically, an unsecured loan for business use will be offered for a term of 3 – 18 months, though some lenders will offer terms anywhere between one month and three years.

As there is no collateral used on an unsecured business loan, they present a higher level of risk to a lender. This is often reflected by higher interest rates and fees.

Due to the speed, flexibility and accessibility of unsecured business loans, they have quickly become the most popular form of business finance Australia has on offer.

Unsecured Business Loans