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Unsecured business loans

Find and compare flexible business loans that don't require asset collateral

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When considering finance for your business, there are a few things that are often at the forefront of a business owner’s mind: reducing costs, maximising benefits and minimising risk to the business. Finding a competitive unsecured business loan can help to achieve all of these goals.

To find out more about how unsecured business loans work and how to find the best one for your business, see below for our comprehensive guide.

Compare unsecured business loans available in New Zealand

Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Monthly Service Fee Application Fee
Harmoney Business Loan
6.99% - 29.99%
$2,000
$50,000
Up to 60 months
$0
$200-$450 depending on loan size
Apply for an unsecured business loan up to $50,000 with no early repayment fees. Eligibility: Be a NZ resident/citizen and have a good credit score.
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What is an unsecured business loan?

An unsecured business loan is a form of business finance that does not require asset security, such as commercial or personal property, as collateral.

How do unsecured business loans work?

The eligibility for these loans is based on your business’s capacity to repay the loan, which is determined by examining monthly sales and cash flow.

While it used to be the case that businesses needed security to be eligible for a business loan, this is no longer a hard-and-fast rule. Secured business loans are loans where businesses use property to guarantee the loan. Using an asset as guarantee means that if the business defaults on repayments, the lender can repossess the property to cover the cost of the loan.

Why don’t I need security?

The small business loans market has changed with the rise of fintech lenders. These lenders are filling a gap in the market left by banks, as fewer business owners could offer security and were, therefore, unable to access business funding. In response to this, banks have now started to offer their own unsecured business loan products, with some targeted at small or innovative businesses.

Are unsecured business loan rates competitive?

Today there are more options than ever when it comes to unsecured business loans. With more non-bank lenders entering the market, competition is fierce, and because a lot of these lenders are based entirely online, they have fewer overheads and can offer potentially lower rates than the bigger banks.

This being said, secured business loans do tend to have lower rates than unsecured loans because they pose less risk to the lender.

How much can I borrow?

Lenders offer varying amounts for unsecured business loans but they may range from $1,000 to $500,000. You may find that the amount you’re eligible for depends on your monthly turnover. For example, if you make $50,000 revenue per month you may be eligible to borrow that amount.

Pros and cons of unsecured business loans

There are a number of benefits and drawbacks to getting an unsecured loan.

Pros:

  • Less risk to the borrower. There is less risk posed to your business because if you default on the loan, you won’t lose your personal or company property.
  • Increased flexibility. An unsecured business loan may come with fewer limitations, such as how you can use the loan, than a secured loan.
  • Quicker turnaround time. Because unsecured loans typically require less documentation, you could receive funds for your business in as little as a few hours with some lenders.

Cons:

  • Higher rates and fees. Unsecured business loans pose more risk to the lender so they tend to cost more.
  • Less finance is available. Depending on the turnover of your business, you may find it difficult to borrow larger sums of money without asset security.
  • Bad credit applicants may struggle. If you have bad credit, you might find it harder to qualify for an unsecured business loan. However, some forms of unsecured business finance such as invoice finance do accept bad credit applicants.

Is my business eligible for a loan?

Eligibility criteria differ between lenders but you usually need to meet the following:

  • Business turnover. Lenders may have a minimum turnover requirement.
  • Time in operation. You may be required to show that you’ve been operating for a specific amount of time, which is usually six months to one year.
  • Director’s credit history. Your business credit files and the personal credit files of directors may be checked.
  • Business premises. You may be required to have been leasing the same location for a particular period.
  • Business structure. The requirement is usually that your business is registered in New Zealand, but lenders may only lend to sole traders, partnerships or other such business structures.

Can I get an unsecured business loan to start a business?

Many lenders have strict requirements regarding the amount of time a business needs to have been operating. However, people looking to start a new business can also access funding without the need to offer security. Find out more about start-up loans in our guide.

How to compare unsecured business loans

Unsecured business loans come with a range of features that you can look at to compare your options. Make sure you check the following:

  • Loan amount

    Lenders have set minimum and maximum amounts that they will lend, so make sure the amount you need is on offer from the lender.

  • Turnaround time

    Many lenders can now get your approved funds to you within 24 hours, but other lenders may take longer. If you need your funds by a specific time, make sure the lender can accommodate this.

  • Interest rate

    Comparing interest rates is a good way to determine how competitive a loan is. However, remember that fees may also apply, so check this when you’re comparing.

  • Repayment period

    How long is the loan term? The length of the term affects how high your repayments are. You can use a business loan calculator to see what your repayments are likely to be and when you can repay the loan.

  • Fees

    Up-front and ongoing fees such as application fees and monthly fees may apply to your business loan. You may also need to pay a loan documentation fee or direct debit fee. Comparing the level of fees you need to pay can help you determine its competitiveness.

Is there anything to bear in mind before I apply?

The two main things to consider are the cost of the loan and whether your business can afford it. Consider your current profits and cash flow and find out how long the loan term will be. By incorporating the repayments into your budget, you can see whether you can afford it.

How to apply for an unsecured business loan

Start by comparing your unsecured business loan options. The application process differs between lenders, but you typically need the following to apply:

  • Personal identification such as a driver’s licence or passport.
  • Details of your business accounting software or your business’s financial documents.
  • The business’ NZBN.
  • Information about the business’ partners or directors.

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