Boost your cash flow with an unsecured business loan

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    • Credit limits up to £500,000
    • 24 hours to get a decision
    • No fees for repaying early
    • Top-ups available

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    What are unsecured business loans?

    For UK businesses who need to borrow money but don’t want to use assets as collateral, an unsecured business loan can be the fastest, most cost-effective way to access finance.

    There are two main variations of business loans: secured loans and unsecured loans. In this article, we explore the differences between both and discuss the key things you need to know about unsecured business loans so that you can decide which option is best for your business.

    An unsecured business loan is a short-term finance option for businesses that don’t want to guarantee something they own (collateral) to the lender if they can’t repay. This could include assets such as equipment, property or inventory.

    So with an unsecured business loan, your assets are safe, as the lender cannot take ownership of them if you fail to pay back the loan. However, because these loans aren’t secured against any of your belongings, they’re riskier for the lender. This means they tend to carry higher interest rates, stricter conditions and are likely to be smaller amounts over shorter periods of time.

    Unsecured business loans can be used for a range of purposes, including:

    • Short-term financing
    • Covering unexpected expenses
    • As a cash advance before an invoice is settled

    How do unsecured business loans work? 

    Unsecured business loans work on a simple principle: borrowing without collateral. There are more and more lenders out there that offer this type of loan, so it’s important that you spend time thinking about the other requirements you’re looking for, such as: 

    • Ease of application
    • How fast you need the cash in your bank account
    • The amount you need
    • The repayment period

    How our unsecured business loan works

    1. Apply online

      Our unsecured business loan is designed with small businesses in mind, so we'll just need the basics about your business to make a decision.

    2. Get a decision in just one working day

      We know that things move fast when you run your own business, which is why we aim to give you a decision in just one working day. If we approve your application, you can have the money in your account within 24 hours.

    3. Repay over 24 months (or earlier)

      You can borrow the money for up to 24 months, but if you’d like to save on interest you can always repay early without any fees. Just keep the money for as long as you need it.

    Apply now

    Applying won't affect your credit score

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    What is the difference between secured and unsecured loans?

    With secured business loans, you need to put down some form of collateral as security against non-payment. This is usually a business asset such as property, equipment, or any item that holds value.

    If you’re unable to repay your loan then the lender can take possession of the asset you’ve put down as collateral, to settle the debt you owe to them. The benefit of taking out a secured loan is that you’ll likely get better payment terms with a lower interest rate.

    An unsecured business loan is ideal for businesses that don’t want to put their assets at risk, or those that don’t have any assets to use as collateral. With higher interest rates and shorter terms, it’s more favourable for businesses that need a faster solution.

    Unsecured loans vs secured loans for small businesses

    The majority of small business loans are unsecured. This is because, as a small business, you may not have enough collateral to offer the lender as security against non-payment.

    With that said, there are some secured small business loans available, so it’s important to shop around and compare your options. Be conscious of your cash flow, assets and liabilities, and the risk you’d be taking with a secured business loan should things not go as planned.

    What are the pros and cons of an unsecured loan?

    Unsecured loans are popular among business owners due to the lower risk involved – it certainly helps your peace of mind to know that your assets won’t be at risk. The lack of associated collateral means there’s less paperwork, fewer restrictions and minimal hoops to jump through when you need capital in a hurry.

    • Free control over your assets: An unsecured business loan leaves you free to buy and sell assets with no restrictions. This means that you have greater flexibility in choosing how you develop and grow your business.
    • Fewer upfront fees: Taking out a secured business loan means that you’re likely to have to pay for valuation fees, so that the lender can work out how much your assets are worth. An unsecured business loan skips this, meaning you can invest that money in your business instead.
    • Easier for new businesses: If you’re a new business, or work in an asset-light industry, you won’t always have assets that provide enough value for a lender, which could limit your ability to get a secured business loan. An unsecured business loan eliminates the need to do so and could be a more viable option for those that have been established more recently. Check out our article on start up funding options.

    The main disadvantage is that the lack of secured assets and increased risk for the lender result in higher interest rates, tighter repayment timelines, and potentially smaller loan amounts available.

    Keep in mind though that this varies depending on the lender and their underwriting process – iwoca’s Flexi-Loan uses real-time data from your business to quickly and automatically assess your business’s lending potential without the need for securing assets.

    How much can you borrow with an unsecured business loan? 

    The amount you could get is also tied to the lender’s policy and risk appetite. For example, at iwoca we usually offer up to 10% of your annual revenue, in the limit of £500,000. 

    To get a large business loan without collateral, it’s best to show that you have a strong cash flow and lots of experience trading. Also, your balance sheet should show you can easily repay the loan. If your credit history is less than ideal, it’s important to provide evidence of a consistent growth trend.

    Types of unsecured business loans

    There are a few different types of unsecured business loans, each suited to varying situations. Some examples include:

    • Fast business loans: short-term business loans that you can get quickly. They’re typically used to cover unexpected or emergency expenses like broken machinery.
    • Small business loans: if you don’t need to borrow much a small business loan may be all your business needs to get through a rough patch.
    • Large business loans: usually for businesses that are looking to expand and invest in growth. You may need a strong credit history and good cash flow to qualify for this type of unsecured loan.
    • Invoice financing: a way to get cash immediately for your unpaid invoices. The lender will give you a percentage of the invoice value upfront and then you can repay them once your customer has paid you. Invoice financing is ideal for businesses that are waiting on a payment from a customer. With iwocaPay, your customers can choose to pay upfront or spread their payments across 3 monthly instalments (subject to approval).‍

    How to get an unsecured business loan

    If you're wondering how to get unsecured business loan funding, don't worry, the application process is usually simpler than that of a secured loan.

    1. When you’re applying, you’ll need to give your personal and financial information, including your credit score, annual income and existing debts. 
    2. The lender will use this information to determine whether you’re a good candidate for an unsecured business loan.
    3. You’ll also need to give information on the amount of money you want to borrow and how much time you need it for. This is important because different lenders offer different repayment terms, interest rates and fees.

    Once you’ve completed your application, the lender will assess it and decide whether or not they want to approve your request. If approved, they’ll contact you with details on how much money you can borrow and what the repayment terms are.

    Is there a personal guarantee on an unsecured business loan? 

    It’s likely that lenders ask you to sign a personal guarantee to secure the loan. The applicant, often the business owner or Director, must personally repay the loan if the business fails. 

    This is a safety net for the lender but also helps SMEs access finance. In simple terms, although the loan isn't backed by business assets, your personal assets (like your house or savings) could be in danger if you don't pay back the loan. Always shop around for the best product and don’t hesitate to seek legal advice before signing a personal guarantee.

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    Unsecured business loans FAQs

    Here is a bit more information we think might help. If you want to know more about unsecured business loans, or iwoca, check our FAQs.

    What is the eligibility for unsecured business loans?

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    Eligibility criteria will vary from lender to lender, but in order to get an unsecured loan it’s likely you’ll need to have a good trading history. Unsecured loans are riskier for the lender, so they may be more hesitant to offer them to businesses with poor track records.

    Can unsecured business loans hurt your business’ credit score?

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    If you default on an unsecured business loan or make a late payment then this may impace your credit score. Additionally, taking out an unsecured loan could impact your ability to take out a concurrent loan in the future.

    Are unsecured business loans safe?

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    Unsecured loans are a safe way for your business to secure short-term funding without having to guarantee something that you own. Before taking out any type of loan, you should conduct background checks on the lender or the business loan broker.

    Do banks give loans to start a business?

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    Some banks will provide loans to start-up businesses, depending on the risk involved. There are several other funding options available if you don't qualify, such as an iwoca Flexi-Loan.

    How long do I need to repay my business loan?

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    Loan repayments will depend entirely on the amount and type of loan. For example, our Flexi- Loan allows you to take out £1,000 to £500,000 over 24 months, with no early repayment.

    Why do businesses need an unsecured loan?

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    There are lots of different reasons why you might want an unsecured loan. Debt management, investing in growth and repairing damaged equipment are just a few different reasons.

    The iwoca story

    Over the past eleven years iwoca has grown from a small start-up to one of the fastest-growing business lenders in Europe. Now we're a team of around 400 in London and Frankfurt working towards the goal of funding one million small businesses.

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    Questions? We're here to help

    Call us at 020 3397 3375 from Monday to Friday (9am - 6pm). We can take your business loan application over the phone, or answer your questions about applying online.

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