Unsecured vs. Secured Small Business Loans: Which Is Right for You?

You need $150,000 to upgrade equipment.

Your bank is recommending a secured loan over your property, while an online lender is offering fast unsecured funding.

So—which option is actually smarter for your business?

This guide breaks down the differences clearly, helping you choose based on risk, speed, eligibility and long-term strategy. If you’re actively comparing funding options, you can also review Broc Finance’s small business loans to understand how each structure fits different business needs.

What Are Secured and Unsecured Small Business Loans?

Understanding the difference between secured and unsecured small business loans starts with one key question: Is collateral required?

Secured small business loans

Backed by assets such as:

• Property
• Vehicles
• Equipment or machinery
• Business assets
• Second mortgages

Because collateral reduces risk for the lender, secured loans generally offer lower interest rates and longer terms.

Unsecured small business loans

These require no physical collateral. Lenders instead assess:

• Cash flow
• Bank statements
• Credit profile
• Trading history
• Industry performance
• Personal guarantee strength

Unsecured loans provide speed and flexibility, with approvals often within 24–72 hours.

Key Differences at a Glance

When a Secured Small Business Loan Makes More Sense

A secured business loan is often the better choice when funding needs are significant.

Choose a secured loan if you:

• Need a large loan amount (often $250k–$2M+)
• Want lower monthly repayments
• Are comfortable using property or machinery as security
• Are undertaking long-term upgrades or expansion

Manufacturing and logistics businesses commonly use assets such as machinery or vehicles to secure funding. For equipment-heavy industries, options like asset finance may also apply.

When an Unsecured Small Business Loan Is the Better Fit

An unsecured small business loan is ideal when speed and simplicity matter more than offering collateral.

This option suits businesses that:

• Need funds quickly for fit-outs, stock, repairs or marketing
• Prefer not to use personal or business property as security
• Are completing short-term projects
• Want flexible, fast-access funding

If your documentation is limited, some SMEs also choose low doc business loans, which provide streamlined approvals without needing full financials.

How Lenders Assess Risk for Secured vs Unsecured Loans

Secured loans: what matters most

• Value of collateral
• Equity position (LVR)
• Financial statements
• Business trading stability
• Revenue patterns

Lower risk to the lender typically results in better pricing and longer terms.

Unsecured loans: what’s assessed

• Cash flow consistency
• Bank statement health
• Credit score
• Industry volatility
• Length of trading
• Personal guarantee

Because there's no asset backing, unsecured loans use risk-based pricing, but remain far easier and faster to access.

Case Examples: Choosing Between Secured and Unsecured

Case Example 1 — Secured loan for large-scale manufacturing upgrade

A manufacturing business required $400k for new production machinery. A secured facility provided:

• Significantly lower interest
• A long loan term
• Repayments aligned with asset life

Case Example 2 — Unsecured loan for hospitality renovation

A hospitality operator needed $75k for a fast pre-season renovation. An unsecured loan allowed:

• Same-week approval
• No property used as collateral
• Repayment during peak trade

Case Example 3 — Unsecured facility for rapid expansion

An automotive business secured $500k unsecured to capitalise on a time-sensitive growth window—proving how unsecured capital can unlock opportunities without delays.

Common Mistakes When Choosing Secured vs Unsecured Loans

Business owners often get caught by:

• Comparing loans solely on interest rate
• Using the family home as security without understanding the risk
• Locking themselves into long secured terms unnecessarily
• Assuming unsecured loans are “bad” because pricing is higher
• Going directly to a bank and missing specialised lender options

The right choice depends entirely on purpose, timeframe, repayment comfort and risk appetite.

How Broc Finance Helps You Choose the Right Structure

Choosing between a secured or unsecured loan for small business doesn’t have to feel overwhelming.

Broc Finance supports business owners by:

• Comparing multiple lenders instantly
• Showing the pros and cons of secured and unsecured structures
• Aligning repayments with your cash flow
• Explaining collateral requirements and risks clearly
• Matching product type to your goals, industry and urgency

Whether you're upgrading equipment, managing cash flow or expanding operations, Broc Finance helps you secure funding that fits your strategy—not just what one lender offers.

FAQs: Secured vs Unsecured Small Business Loans in Australia

What is the difference between secured and unsecured small business loans?

A secured loan is backed by collateral; an unsecured loan is approved based on cash flow and credit.

Is a secured or unsecured loan better for small business?

Secured loans are suited to large, long-term investments. Unsecured loans fit short-term, fast-access needs.

Do I need security for a small business loan?

No—many SMEs qualify for unsecured lending with no property required.

Will a secured loan always be cheaper?

Generally, yes. Collateral lowers lender risk and pricing.

Can I switch from unsecured to secured later?

Yes. Many businesses refinance into a secured facility once assets or equity become available.

Ready to Choose the Right Loan Structure for Your Business?

Secured and unsecured loans each serve a different purpose. With the right strategy, you can use either option to grow confidently—without unnecessary risk or delays. Broc Finance compares lenders and structures to help you secure the most suitable solution.

Explore your options or get personalised guidance.