Secured vs Unsecured Business Loans: What's Right for Your Business?

The choice between a secured and an unsecured business loan is a trade between price and exposure. Security, whether property, equipment or a charge over the business's assets, lowers the lender's loss if the loan fails, so the rate, the amount and the term all improve; in exchange, the named asset is on the line. An unsecured loan leaves the assets alone and settles faster, and the lender prices the extra risk into the rate and usually asks the directors for a personal guarantee.

This guide sets the two side by side, shows what the rate gap costs in dollars, and matches each to the situations it suits. If the question is simply which kind of loan you have, Is a small business loan secured or unsecured? answers it.

The Two Compared

Credit for business purposes sits outside the National Credit Code, so lenders are not required to quote a comparison rate; comparing the two on total cost over the term, fees included, is up to the business. A factor rate multiplies the amount borrowed to give the total repayable, so $50,000 at 1.2 costs $10,000 whether it runs three months or twelve, which over a short term is far more than a 20% annual rate.

What the Rate Gap Costs

The difference in rate is the whole argument for security, so it is worth seeing in dollars. Take $100,000 over three years, repaid monthly, at illustrative rates of 9% p.a. secured and 14% p.a. unsecured. The rates are examples chosen in September 2026 to show the mechanics, not quotes; the gap between secured and unsecured pricing depends on the lender, the asset and the business.

Subject to lender approval, terms, and conditions apply.

About $8,600 separates the two over three years, before fees. On a larger amount or a longer term the gap grows; on a $20,000 loan repaid inside a year it shrinks to a few hundred dollars, which is why small, short borrowing is often unsecured without much lost.

When a Secured Loan Makes Sense

Buying an asset is the clearest case: a vehicle, machinery, a fit-out or premises is cheapest to fund with finance secured by the asset itself, and lenders offer that as a matter of course. Larger amounts and longer terms favour security too, because the rate saving adds up over the years and unsecured lenders cap what they will advance. A business with property, clean financials and a plan that runs beyond two or three years usually pays less by securing, provided it would keep the asset anyway and can carry the repayments through a slow period.

When an Unsecured Loan Makes Sense

A short cash gap, a stock order ahead of the season, a deposit on a contract or a small opportunity with a deadline are jobs for an unsecured loan or an overdraft: the amount is modest, the term is short and the speed matters more than the rate. So is borrowing by a business with strong cash flow but nothing a lender wants as security, or an owner who will not put the family home up as security, though a personal guarantee still puts personal assets behind the debt. The price of that choice is the rate, and the way to keep it down is a clean credit file, tidy bank statements and no unmanaged tax debt; the ATO can report a business tax debt of $100,000 or more that is overdue by more than 90 days to credit reporting bureaus where the business is not engaging with it.

Revolving Facilities Can Be Either

A business line of credit or overdraft is a limit the business draws on and repays as it likes, paying interest on the drawn balance. Banks generally secure larger limits against property; online lenders offer smaller unsecured limits at a higher rate, sometimes with a fee on the limit whether it is used or not. The same comparison applies: the secured version is cheaper per dollar drawn, the unsecured version is quicker to set up and leaves the assets alone.

The Points That Decide It

Four questions settle most cases. What is the money for, and does that purpose come with an asset that can secure it? How much and for how long, since the rate gap grows with both? What is at risk on each side, the asset or the guarantor? And how quickly is the money needed? A broker who works across secured and unsecured lenders can price both routes for the same business in one pass; Emu Money's finance specialists compare options from 50+ lenders. Complete the get started form and someone will be in touch.

Subject to lender approval, terms, and conditions apply.