Should I take a secured or unsecured business loan?

The lender decides. For a smaller limited company, a lender of an unsecured loan can ask each director for a personal guarantee, because it has no charge over the company’s assets. Ask whether it will cap the guarantee at a set amount, whether it covers only this loan, and what releases it. Read what a personal guarantee means before you sign.

Yes. A lender can take a fixed charge over equipment or vehicles, or a debenture over all the company’s assets, including stock and the money customers owe it. Asset finance is secured on the asset it buys. Invoice finance is secured on invoices. Property gives the longest terms, and the other assets support lending matched to their value and life.

Each lender prices for its own risk, so compare actual offers. Security reduces what a lender could lose, which can show in the rate, but a secured loan carries valuation and legal costs and a longer term adds interest. Add up the interest, fees and costs of each offer in pounds over its term.

The lender releases it, and the company should record the release at Companies House on form MR04 so the charge shows as satisfied. If the charge is an all monies debenture, check that the company owes the lender nothing else. Removing a satisfied charge.

Not through the loan itself. If you signed a personal guarantee and the company cannot pay, the lender can claim against you personally, take you to court, and then use the court’s enforcement powers, which can include a charging order over your home. A guarantee secured by a charge over your property gives the lender a direct claim on it.

A secured business loan is backed by a charge over property, equipment or the company’s assets as a whole, which the lender can sell if the loan is not repaid. Security lets a lender offer larger sums, longer terms and lower pricing than unsecured lending. In return the charged assets, and often a director’s personal guarantee, stand behind the debt. The full answer.

An unsecured business loan is lent without a charge over your company’s property or equipment, so the lender relies on your trading record and on personal guarantees from the directors. Sums are smaller and pricing is higher than secured lending, and the guarantee puts your own assets behind the debt. The full answer.

A debenture is a legal document that gives a lender security over a company’s assets, through fixed charges over named assets and a floating charge over the rest. It must be registered at Companies House, and it decides where the lender stands if the company becomes insolvent. The full answer.

A personal guarantee is a separate contract in which you promise to pay a lender if your company does not. It makes you personally liable for the company's debt, and the lender can enforce it against your own assets. The full answer.