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Compare secured vs. unsecured business loans

Not sure if a secured or unsecured business loan is more suited for your company's needs? Find out here.

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Editor's choice: First Down Funding business loans

First Down Funding business loans logo
  • Works with bad credit and most industries
  • Only 100 days in business required
  • No credit check
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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.

What is the difference between secured and unsecured business loans?

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.

Secured and unsecured business loans you can compare

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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

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UCC lien on business assets is required for loans over $100,000

Peer-to-peer lender offering small business loans up to $500,000

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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

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None

Lines of credit and invoice financing with a max draw limit of $100,000

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None

Business equipment financing and leasing services, lines of credit, and small business loans with a max financing amount of $5,000,000

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None

Invoice financing for digital media companies

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None

Short-term loans giving e-commerce businesses up to a 25% advance on future PayPal sales or up to $300,000

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None

Term loans, working capital, expansion and inventory loans with a max draw amount of $600,000

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General lien on business assetsPersonal guarantee

Term loans up to $100,000 and lines of credit with a max draw amount of $250,000

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Personal GuaranteeGeneral lien on your business assets (in certain cases only)

Lines of credit with a max draw amount of $250,000

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Personal guarantee

Microloans for small businesses with a max amount of $250,000

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General lien on business assetsPersonal guarantee

Lines of credit and invoice financing with a max amount of $5,000,000

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Personal guaranteeUCC-1 on business assets

Lines of credit and business term loans with a max amount of $500,000

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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

What is a personal guarantee?

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.

What is considered a valuable asset for security?

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:

  • Personal or commercial real estate
  • Vehicles
  • Business equipment
  • Investment accounts

You can also borrow against the valuation of your business as a whole.

25+ types of collateral you can use to secure different types loans

Is an unsecured or secured loan best for my business?

A secured business loan may be a good option for you if:

  • You’re looking to borrow a large amount of money over $1 million.
  • You have several assets you can secure the loan against.
  • You are in a position to make repayments over a long period of time.

You can usually find secured business loans from banks and lenders that offer SBA loans, but some alternative business lenders also offer secured loan options as well.

You may want to consider an unsecured business loan if:

  • You have a small- to medium-sized business with few or no valuable assets.
  • Your business is established and has growing monthly revenue.
  • You need a quick cash injection.
  • You can repay the loan over a period of one to five years.

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.

Compare top business loan providers

Data indicated here is updated regularly

Name Product Filter Values Loan amount APR Requirements
First Down Funding business loans
$5,000 – $300,000
Fee Based
At least 1 year in business, an annual revenue of $100,000+, and a minimum credit score of 400
Alternative financing up to $300K with highly competitive rates.
Lendio business loans
$500 – $5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.
ROK Financial business loans
$10,000 – $5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.
OnDeck small business loans
$5,000 – $250,000
As low as 9.99%
600+ personal credit score, 1 year in business, $100,000+ annual revenue
A leading online business lender offering flexible financing at competitive fixed rates.
Rapid Finance small business loans
$5,000 – $1,000,000
Fee based
Steady flow of credit card sales, bad credit OK
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Compare up to 4 providers

Bottom line

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.

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