Unsecured business loans

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.

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How an unsecured business loan works

The lender advances a fixed sum to the company and takes monthly repayments over a term set at the start. It registers no charge at Companies House over your premises, vehicles or machinery. If the company stops paying, the lender has no specific asset to sell. It ranks alongside your suppliers and other unsecured creditors if the company becomes insolvent.

Lenders allow for that weaker position in three ways. They lend smaller sums unsecured. They charge more for it. And they ask the directors for personal guarantees, so that each director’s own assets stand behind the debt in place of company assets. With a guarantee in place, the directors carry the risk the lender would otherwise have secured on the business.

The money can go on most things that keep a business moving: stock for a busy season, a marketing campaign, a new hire, a fit-out in rented premises, a tax bill. Because the lender is not valuing an asset, it decides on the business’s figures and the directors’ records.

What the lender relies on

Cash flow

The repayments have to fit inside the cash the business already makes, after its other debts. Lenders read your bank statements, often through open banking, to see what comes in and goes out each month.

Credit history

The company’s credit file and each director’s personal file. Missed payments, county court judgments, a recent insolvency or returned direct debits weigh heavily against an unsecured application.

The directors

A personal guarantee from each director, and sometimes from shareholders above a set percentage. The lender can pursue each guarantor once the company defaults.

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Personal guarantees on unsecured loans

A personal guarantee makes you liable for the company’s debt if the company cannot pay. The lender can demand payment from you, sue you, obtain a judgment and enforce it against your savings, your income or your share of your home. If the debt is large enough it can petition for your bankruptcy.

The terms vary from lender to lender. A guarantee can be capped at a fixed sum or unlimited. It can cover this loan alone or every debt the company owes the lender. Where several directors sign jointly and severally, the lender can pursue any one of you for the full amount and leave you to recover shares from the others.

Read the cap, the scope and the release clause before signing, and take independent legal advice where the lender asks you to confirm that you have. Some lenders and insurers offer personal guarantee insurance, which pays part of a call. What a personal guarantee means for a director covers the effect on your home, your family and your estate.

What unsecured lending costs

With no asset to fall back on, the lender prices in a higher chance of losing money. For the same company, unsecured rates sit above secured ones, and the gap widens for younger businesses and weaker credit records. Some short-term lenders quote a factor rate. A factor of 1.2 on £50,000 means you repay £60,000 whatever the term, so the shorter the term, the higher the annual cost.

Add the arrangement fee, any broker fee and the early repayment terms. Some unsecured loans charge interest for the full term even when you repay early. Others let you settle with a small charge or none. Ask for the total amount repayable in writing and compare that figure between lenders.

Repaying £50,000 unsecured over three years

Illustrative example

Your company borrows £50,000 unsecured over three years at an assumed rate of 12% a year, repaid monthly. After its other commitments, the business generates an average of £2,500 a month in spare cash.

Monthly repayment
£1,660.72
Total repaid over 36 months
£59,785.76
Total interest
£9,785.76
Spare cash each month
£2,500.00
Debt service cover (spare cash divided by repayment)
1.51 times
Cash left each month after the repayment
£839.28

The lender looks at that cover figure and at how steady the £2,500 is through the year. Test your own figures in the debt service cover calculator.

What happens if the company cannot repay

Miss a payment and the lender will charge default interest and fees under the agreement, report the arrears to the credit reference agencies and contact you. Speak to the lender before a payment is missed. A payment holiday, a period of reduced payments or a longer term is easier to agree while the account is up to date.

If the arrears continue, the lender can end the agreement and demand the whole balance. Without security over company assets, it can sue the company, obtain a county court judgment and petition to wind the company up. At the same time it can call on the personal guarantees and pursue each guarantor for the sum due.

In a liquidation, an unsecured lender ranks behind secured lenders, the costs of the insolvency and preferential creditors. Whatever it does not recover from the company, it claims from the guarantors. What happens if your business cannot repay a loan sets out each stage.

Who a funding search covers

Sole traders and partnerships

A funding search through Swoop covers limited companies and LLPs, and sole traders and partnerships borrowing more than £25,000. Unsecured borrowing of £25,000 or less by a sole trader or small partnership is regulated credit: apply to Start Up Loans directly or ask your own bank.

Business loan affordability calculator

Your profit against all your loan repayments, new and existing, as the cover ratio a lender works out.

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Questions people ask

Can I get an unsecured business loan without a personal guarantee?

Some lenders lend without one to established companies with strong accounts and a long record, but small companies should expect to be asked. A guarantee is how the lender gets a fallback when it takes no security over company assets. If you have to give one, negotiate a cap, limit it to this loan, and agree in writing that it ends when the loan is repaid.

How much can I borrow on an unsecured business loan?

Each lender sets its own limits, and the figure for your company depends on its turnover, profit, existing debt and credit record. The lender works out the monthly repayment your cash flow can carry and lends what that repayment will service over the term. Sums are smaller than a lender would offer with security. The business loan calculator shows the repayment on any sum and term.

Does an unsecured business loan affect my personal credit?

The lender searches each director’s personal credit file when it assesses the application, and that search is recorded. A loan to a limited company sits on the company’s file. If the company defaults and the lender calls your personal guarantee, any judgment against you for failing to pay goes on your personal file and affects future mortgages and credit.

Can a sole trader get an unsecured business loan?

Yes, but a sole trader borrows personally, because there is no company to borrow. Loans of £25,000 or less to a sole trader or small partnership are regulated consumer credit. For those sums, Start Up Loans offers up to £25,000 at a fixed 7.5% a year, at November 2026, to businesses that are new or have traded for up to 60 months. Above £25,000, a funding search through Swoop can include a sole trader.

Is an unsecured loan more expensive than a secured one?

For the same business, yes. The lender has no asset to sell if the loan goes wrong, so it charges more for the risk and lends less. The difference narrows for a strong company with a long record. Compare offers on the total repayable in pounds, and weigh the lower price of secured borrowing against the assets it puts at risk. Secured or unsecured sets the two side by side.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

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Start a funding search

Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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