Unsecured business loans explained – finding the best option for you

Updated on 23 October 2023

Unsecured business loans involve borrowing a set sum from a professional lender, signing a contract that promises to repay the borrowed amount – plus interest – over an agreed period. This loan is referred to as unsecured because you will not need to place any collateral, such as property or company equipment, on the line to secure the funding. 

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What are the best unsecured business loans?

Best is always a subjective term. Take all the considerations we discuss below under advisement, and investigate your unsecured business loan options. 

Here are the most popular providers of this line of credit. Some are traditional financial bodies, such as high street banks, while others are peer-to-peer lending organisations and specialist funding bodies that look to assist SMEs.

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Business banking options compared

Revolut Business
✓ Business Current Account
✓ Award-Winning Mobile App
✓ Quick & Easy Application Process
Pricing Trial period Contact

Tide Business Bank Accounts
✓ Free, Plus, or Pro Account
✓ iOS & Android Mobile App
✓ Upload & Auto-Match Receipts
Pricing Trial period Contact

Card One Money
✓ No Credit Checks
✓ Simple Fees
✓ Up To 3.5% Cashback
Pricing Trial period Contact

ANNA Money
✓ Apply In 10 Minutes
✓ Bookkeeping & Payroll Tools
✓ User-Friendly Mobile App
Pricing Trial period Contact

HSBC Business Banking
✓ Business Current Account
✓ In-Branch, Online & App Banking
✓ FSCS Protected
Pricing Trial period Contact

Metro Business Banking
✓ Business Current Account
✓ High Street Presence
✓ FSCS Protected
Pricing Trial period Contact

Mettle Business Banking
✓ Business Bank Account
✓ Online & App
✓ Quick & Easy Application Process
Pricing Trial period Contact

Monzo Business Banking
✓ Business Current Account
✓ Dedicated mobile app experience
✓ FSCS Protected
Pricing Trial period Contact

Virgin Money
✓ Business M Account
✓ In-Store, Online & App Banking
✓ Insights & Forecasting Platform
Pricing Trial period Contact

15 top unsecured business loans UK

LenderMinimum turnoverMaximum loan amountMaximum repayment term
Barclays BankN/A£100,00010 years
CapalonaN/A£500,00024 months
Cube Funder£50,000 PA£100,00012 months
Funding Circle£25,000 PA£500,0006 years
Funding Xchange£100,000 PA£500,0005 years
Iwoca£50,000 PA£500,00024 months
Love Finance£50,000 PA£250,0005 years
NatWestN/A£50,0007 years
Nationwide FinanceN/A£500,0005 years
Previse£250,000 PA£500,0009 months
Royal Bank of ScotlandN/A£50,0007 years
SantanderN/AUnlimited25 years
Swish FundN/A£1,000,00012 months
Swoop Funding£50,000 PA£1,000,0005 years
TSBN/A£1,000,000120 months
Best unsecured business loans compared

Interest rates will vary wildly depending on how much you look to borrow, how long the loan term is for, and your unique credit history. Each of these suppliers will provide a loan calculator to help you identify how much you will likely be charged in interest.

What can I use an unsecured business loan for?

You borrow against an unsecured business loan for any reason associated with trading. Here are some popular reasons for SME owners to seek this line of borrowing.

  • Buying new stock for a business
  • Purchasing or upgrading workplace apparatus or equipment
  • Laying down a deposit for an office or other workplace premises
  • Making structural improvements to a working environment
  • Consolidating multiple business debts into one monthly, manageable payment

You could also apply for an unsecured business loan to meet a monthly payroll, but such an application is less likely to be looked upon favourably. It’s akin to applying for a personal loan to pay your rent or bills – it suggests to the lender that you’re struggling to make ends meet and are thus a credit risk.

How long does it take to get an unsecured business loan?

Once the application is complete and approved, you’ll usually have access to the funds provided by an unsecured business loan within 48 hours. Some lenders will even send the money over the very same day. 

How much can I borrow on an unsecured business loan?

This depends on who you approach and the level of risk attached to your business credit score. Unlike personal unsecured loans, which are usually capped at around £25,000, unsecured business loans can run into seven figures – though it’s rare that an SME will be invited to borrow this much without some kind of collateral, or very compelling proof that the repayments will be made.

Is an unsecured business loan cheaper than a personal loan?

Most lenders offer better interest rates on business loans than personal loans, as they are considered lower risk. You will also have the advantage of attaching the business loan to a company, so if you run into financial hardship, your personal credit score does not need to suffer. It may be better to take out an interest free loan as a business rather than an individual if this is an option.

Is a secured business loan cheaper than an unsecured loan?

Yes, a secured loan typically comes with a lower interest rate than an unsecured counterpart. There is a good reason for this, though – you’ll need to place an asset – usually your personal residence – on the line as collateral, and borrow against the equity in this property. 

Important note on failing to make repayments
If you fail to keep up with your repayments, the lender can take you to court and force you to sell your home and settle the debt using the proceeds. Unless you are certain that you can keep up with payments, avoid gambling your personal property to prop up a new or struggling business.

Considerations when taking out an unsecured business loan

When deciding upon options for an unsecured loan, consider the following factors before making your decision.

  • How much you wish to borrow. It’s tempting to think “in for a penny, in for a pound” and borrow more than you strictly need, but interest rates will be higher on larger loans
  • How long the loan is for. A lengthy repayment term means you’ll pay less per month, but the loan will cost your business more in the longer term as you’re paying more interest
  • This interest rate itself – lower is better on paper, but it’s sometimes more fiscally prudent to agree to a fixed interest rate of 10% for the duration of an unsecured business loan. Based on external circumstances, a variable or tracker rate could drop to 7–8%, but could rise to 13–14%
  • The security of the lender. It’s always better to pay more to borrow from an FCA-regulated lender than take your chances on a source that is not monitored

What happens if I default on an unsecured business loan?

It’s never advisable to take out any kind of unsecured borrowing if you’re unsure that you’ll be able to keep up with the repayments. 

While the unsecured nature of the loan means that your assets are safe, and if you took the loan out under a business name it will not impact your personal credit history, your company’s creditworthiness will take a significant hit.

Defaults on an unsecured loan remain on a credit file for around six years. You’ll likely find that other lenders and potential trading partners are more reluctant to extend lines of credit for this period – or if they do, the interest rates will be higher. 

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