What security actually means
Secured lending takes a legal charge over identifiable assets: property, plant, vehicles, stock or a debenture over the business as a whole. Unsecured lending relies on trading performance and, almost always, a personal guarantee from the directors.
Note that unsecured rarely means risk-free for the owner. A personal guarantee is not security over a company asset, but it does put personal wealth behind the debt.
Cost, limits and speed
Secured facilities are cheaper — often five to ten points below an equivalent unsecured line — and reach far higher limits, because the lender's loss position is protected. The cost is time: valuation, legal work and charge registration add weeks.
Unsecured facilities are quicker, often decided in days on open banking and filed accounts, but are typically capped at around one month's turnover or two to three times EBITDA, and priced accordingly.
Choosing between them
Use unsecured borrowing where speed matters and the sum is modest relative to turnover, or where assets are already charged. Use secured borrowing for larger sums, longer tenors and anything where the interest saving over the term comfortably exceeds the transaction costs.
A common structure is both: a secured core facility for the base requirement plus a smaller unsecured line for flexibility.
Frequently asked questions
Can I avoid a personal guarantee?
Sometimes, on well-secured lending with strong asset cover, or by negotiating a capped or partial guarantee. On unsecured lending to an SME it is close to standard.
What is a debenture?
A charge over the company's assets as a whole, combining fixed charges over specific assets with a floating charge over the rest. It usually blocks other lenders from taking a first-ranking position.
Does secured lending mean I will definitely be approved?
No. Lenders still test serviceability. Security governs the loss position, not whether the debt can be repaid from trading.
Last reviewed: 2026-08-15