Editor's choice: First Down Funding business loans
- Works with bad credit and most industries
- Only 100 days in business required
- No credit check
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
If you’ve decided to apply for financing for your business, finding the right type of loan is an important next step. There’s a range of financing options available, but two of the most common business loan types are secured and unsecured loans. Read further to see how these two loans compare and which is best for your business.
The key difference between secured and unsecured business loans is the guarantee that is required — secured business loans require you to have assets, whether they be business or personal, to attach to the loan, while unsecured business loans do not.
Secured business loans are typically offered by banks and can help a business access larger amounts. This is because lenders are taking on less of a risk if they know they can recoup their losses should the loan not be repaid. Unsecured business loans tend to come with lower loan amounts and higher rates as the loan is more of a risk.
Receivables or assets (commercial real estate, inventory or heavy equipment)
Loan options including split funding, term loans, equipment financing, invoice factoring, business lines of credit and more
UCC lien on business assets is required for loans over $100,000
Peer-to-peer lender offering small business loans up to $500,000
Assets (commercial real estate, inventory or heavy equipment)
Business financing up to $1,000,000 through merchant cash advances, long-term unsecured loans, equipment financing, and lines of credit
Lines of credit and invoice financing with a max draw limit of $100,000
Business equipment financing and leasing services, lines of credit, and small business loans with a max financing amount of $5,000,000
Invoice financing for digital media companies
Short-term loans giving e-commerce businesses up to a 25% advance on future PayPal sales or up to $300,000
Term loans, working capital, expansion and inventory loans with a max draw amount of $600,000
General lien on business assetsPersonal guarantee
Term loans up to $100,000 and lines of credit with a max draw amount of $250,000
Personal GuaranteeGeneral lien on your business assets (in certain cases only)
Lines of credit with a max draw amount of $250,000
Microloans for small businesses with a max amount of $250,000
General lien on business assetsPersonal guarantee
Lines of credit and invoice financing with a max amount of $5,000,000
Personal guaranteeUCC-1 on business assets
Lines of credit and business term loans with a max amount of $500,000
Lien on business assetsPersonal guarantee from primary business owners
Peer-to-peer lender offering fixed-term business loans with a max amount of $500,000
A personal guarantee is a legally bound promise that the borrower will repay the loan with personal funds if the business fails. Keep in mind most business lenders require a personal guarantee to protect them against major losses if you default.
You may also often see a general lien requirement. A general lien is a lender’s right to keep your business assets in the event you’re unable to repay the loan.
When you’re borrowing against your assets, your loan is secured by the residual value that your assets represent. If you’re unable to repay the loan, the lender may seize your assets to cover the outstanding amount. Any of the following could be used as security:
You can also borrow against the valuation of your business as a whole.
Is an unsecured or secured loan best for my business?
A secured business loan may be a good option for you if:
You may want to consider an unsecured business loan if:
Many lenders offer unsecured business loans, though you’ll likely need to meet stricter eligibility requirements because the lender is taking on more risks. As a minimum, you’ll generally need to be in business for at least a year and have monthly revenue of at least $10,000.
There isn’t one right loan solution for all businesses. By comparing your options and weighing up the pros and cons of each, you can find what’s right for your business.
Reduce your debt by around 30% after fees — but only if you can stick with the program. Here’s how.
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
Here are our top picks for 2021.
Compare 6 lenders to find one that’s a good fit for your needs.
Save money by targeting your coverage to your largest debts.
12 unique financing options — including SBA loans — for new and established franchises.
A lender who primarily offers loans to underserved small business owners.
You only have until the end of March to get your next application in.
While you can get started on your loan application today — you’ll still need to wait for funding.
Grants of up to $10 million for businesses that rely on ticket sales.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.