Published on 24 September 2025
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The process of applying for business funding is typically straightforward, or it should be, until you stumble across keywords that you are unfamiliar with and could have a huge impact on the type of loan you apply for.
“Secured” and “Unsecured” loans, what are they?
It’s important to understand what each of these loan types mean, the benefits they have and ultimately, which works better for your business.
These loans, offered by banks and other financial institutions, let you borrow the funds against assets already in your fleet. 9 times out of 10 this would be a house, but it could also be a car, any other items of high value or all of the above.
Banks will often opt for secured business funding, for their own security. If you were unable to keep up with payments, the bank could seize the asset you borrowed against to cover missing funds. This means the bank doesn’t lose out, but you might.
Pros and Cons
Pros:
With an added level of security, banks and lenders are far more susceptible to offering a higher amount on Secured Loans.
With Secured Loans, banks offer longer terms for you to make your repayments; often 5 or more years.
Even without a squeaky clean credit history, banks could approve you for business funding through a secure loan, due to the added security of the asset.
Cons:
It goes without saying that, with Secured loans, your personal assets are at risk in every business decision.
Because the Lender needs to value and evaluate your assets before confirming they are suitable for a secured loan, approvals can take far longer than other loan types, some that have funds in your account the same day.
Unsecured business loans do not require any type of personal asset, in contrast to a secured loan. These loans, like short-term loans, are great for steading cashflow or supporting growth.
Unsecured business loans are ideal for small businesses with structured plans for expansion but will often ask for a personal guarantee.
Pros and Cons
Pros
As these loans are usually for a relatively small sum, you could have funds in your account the same day. In comparison to secured business loans, the turn around time for unsecured business loans are far quicker.
With an unsecured loan, you have far more flexibility in how you use the funding. Invest in your staff, expand your team or use the funds to manage gaps in your cashflow during seasonal troughs.
Ideal for smaller businesses without many assets to put up as collateral, unsecured loans do not require any collateral so carry less of a risk.
Cons
Rather than securing against assets, Lenders may ask for a personal guarantee. This means you are personally responsible for repaying the funds if the business struggles to.
Missing any of the scheduled repayments will go against your business credit score, affecting your chances of securing business funding in the future. This may also affect your personal credit score.
So, which is better for your business?
Understanding which business loan type is best for you, depends entirely on the circumstances of your business. Whether you are just starting up or have been trading for 10+ years, how quickly you need the funds and how much of a risk you want to take, are all important factors you must consider when looking for business funding.
It is important to take the time to consider all loan types, and what works best for your business. If you need any support or further information on the types of business funding available and what would work best for your plans, Crown Business Finance are the team to go to! Our dedicated account managers have decades of experience, for a range of industries. Our committed team members understand your unique needs and work hard to deliver tailored finance solutions that fuel your growth.
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