Compare the interest rates, funding available, fees, available terms and eligibility requirements of the best unsecured business loans for UK SMEs.
Updated: 9th April 2026
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Expert take
Need to know
Most business loans in the UK are unsecured, with the latest business finance data showing that only a quarter of businesses provide business assets as collateral for business lending.
Unsecured business lending has experienced a lot of innovation in the past few years with challenger banks and specialist online lenders taking market share from traditional high street banks. As conventional high-street banks are rejecting 56% of business lending applications, alternative lenders are meeting the demand with performance-based risk assessments and rapid funding.
If you’ve decided that an unsecured loan is right for you, the next step is to compare the various funding options available. In this guide, we’ve searched the whole market to find the best unsecured options available from UK banks, alternative lenders, and peer-to-peer solutions.
Unsecured loans do not require assets as security for the loan amount. This means that no specific asset, like a property or vehicle, is in danger of repossession should you miss repayments. This suits smaller businesses that have no major assets or do not want to endure the longer application process required to value secured assets.
For unsecured loans, lenders assess your credit history and the health of your financial position, considering factors such as cash flow, balance sheet, and cash reserves. Unlike secured lending, an unsecured loan is usually dischargeable (written off) if your business goes insolvent.
However, most lenders will ask for the protection of a personal guarantor. It’s best not to think of unsecured loans as being protected from personal liability.
To get an unsecured loan, you can apply directly to a lender or use a broker. The benefit of using a broker is that they often have access to products that aren’t public. Businesses are presented with a wider range of lenders, and, like homeowners using a mortgage broker, the broker’s hard work is usually paid for by the lender (in the form of a commission) rather than by the borrower. Going directly can make sense when you have an existing relationship with the lender.
Regardless of the route you choose, you must undergo identity checks, provide proof of address and give evidence of the company’s financial health. Bank statements, financial accounts, and tax returns are standard methods for assessing a company’s financial health. Business plans and cash flow forecasts aren’t typically required for online lenders, but banks may request them.
Unsecured business loans are popular because they’re fast. With online lenders, expect approval within 24 to 48 hours, and funding to come soon after. Banks, however, can take weeks.
Typical eligibility requirements are a trading history of at least 6 or 12 months, though some may require 24 months. Lenders will typically require evidence of profitability, consistent revenue, and the ability to repay the loan.
A good credit score opens up more options. Some lenders require a good score, while some alternative lenders accept a mediocre score if you provide strong recent performance. Some lenders claim applications by limited companies will not impact your credit score. A personal guarantee will usually be required, unless you can find a guarantor.
The amount you borrow will play a big role in whether you qualify. The larger the loan, the more trading history and higher revenue will be required. Additionally, some lenders may exclude high-risk industries, requiring you to seek more specialised options or a broker.
Given the popularity of unsecured loans, a wide range of businesses utilise them. However, they are suited to smaller, newer companies because large assets are not required for security.
Businesses that are struggling with cash flow often turn to unsecured business loans because they’re fast. Their shorter duration also makes them ideal for temporary issues, such as seasonal drops in sales, rather than a 5-year development project for a large construction company.
Startups also prefer unsecured business loans because they typically lack sufficient collateral to secure a loan. If you win a contract with a retailer to stock your product, an unsecured loan may be the fastest way to scale up production to meet that order.
10% APR is a ballpark figure that unsecured loans are frequently advertised at, with a general range of 7% to 20%. The lower range is sensitive to movements in the Bank of England base rate.
Loans with interest rates under 10% are typically either government-backed, which are highly competitive to obtain, or those offered by high-street banks, which are notoriously strict in terms of creditworthiness and business plans.
The APR you are offered will depend on both you and your business’s creditworthiness, recent financial performance, loan amount, and the lender in question.
| Feature | Secured Business Loan | Unsecured Business Loan |
|---|---|---|
| Collateral | Required. An asset (like property, equipment, or vehicles) is used to secure the loan. | Not required. The loan is based on the business’s creditworthiness. |
| Lender Risk | Lower, as the lender can seize the collateral if you default. | Higher, as there’s no asset to recover if you default. |
| Interest Rates | Typically lower due to the reduced risk for the lender. | Typically higher to compensate the lender for the increased risk. |
| Loan Amount | Generally higher, as the amount you can borrow is tied to the value of the collateral. | Generally lower, as the lender is taking on more risk without collateral. |
| Repayment Terms | Often longer, ranging from 3 to 25+ years. | Usually shorter, often from 3 months to 5 years. |
| Application Process | Slower, as it involves asset valuation and additional legal checks. | Faster, with approvals often happening within minutes or hours. |
| Risk to Borrower | You risk losing the asset used as collateral if you fail to repay the loan. | No risk of losing a specific asset, but a personal guarantee may be required, which places the responsibility of repayment on the business owner. |
| Best For | Established businesses with valuable assets seeking a large, long-term loan for investments like property or machinery. | Businesses needing quick access to a smaller amount of cash, or those without significant assets to offer as collateral. |
Yes, a personal guarantee is a common requirement for an unsecured business loan. Should you fail to make repayments within the agreed timeframe, your personal assets may be at risk of seizure and even bankruptcy.
A misconception is that a limited company structure always protects the owner or company directors from personal liability for business debts. This is true until a personal guarantee is signed, which erodes the legal separation between the owner and the business.
An unsecured loan for a limited company without a personal guarantee is possible if the business has exceptional financial health and a strong trading history.
The process of obtaining an unsecured loan begins with self-assessment and an evaluation of the business’s needs. Different types of unsecured business loans have varying eligibility requirements, so it’s essential to understand which loan types are not suitable for your application.
Once you have shortlisted the loan types your business may qualify for and would meet your lending needs, you need to check the eligibility requirements of the specific lenders offering this loan type.
A broker is often the best way to find and secure an unsecured loan. A good business loan broker should have access to an extensive range of lenders, some of which may not be available if you approached the lender directly. They should also know what type of loan you are likely to be approved for after assessing your business.
Term loans: Term loans are a traditional lending arrangement in which a fixed sum of money is borrowed for a fixed period of time. An interest rate is agreed upon, and repayments are made on a regular basis (typically monthly). This is easy to budget for, but has less flexibility for changing needs.
Fast, short-term business loans: Newer fintech lenders have optimised this product for speed. Applications for short-term business loans are streamlined and automated through simple online forms, allowing cash to be released within one to two business days.
Revolving credit facility: This works like a pot that you can dip into. A credit limit is agreed upon (for example, £50,000), and you can use it as needed. You only pay interest on what you have drawn down and for the number of days until repaid. This is ongoing, and there is often a fee for non-utilisation.
Business overdraft: An overdraft allows you to overspend on a specific bank account. It’s a short-term safety net, with interest accrued on the overdrawn amount on a daily basis. There is typically no fee for non-utilisation.
Business credit card: A business credit card is a means of accessing credit through card purchases, whether online or in person. This helps track business and employee spending. A set credit limit is agreed upon, and it works similarly to a personal credit card, often with rewards for spending. If you clear the balance each month, you typically won’t be charged interest.
Merchant cash advance: A merchant cash advance is a lump-sum advance, similar to a loan, but it’s repaid automatically as a percentage of future card sales. A percentage is agreed, and this is applied to all card transactions until the merchant cash advance is fully repaid. It’s automatic, so there’s no risk of missing repayments, and repayments align with business performance.
Choosing the right loan depends on your urgency, revenue model, and the amount you need to borrow.
For a one-time injection, a fast online loan can help capitalise on new opportunities, such as boosting retail stock for a popular product, or help out in an emergency, like replacing a broken oven in a bistro cafe. In both instances, you need proof of positive cash flow and to be comfortable with regular repayment terms.
For companies struggling with their cash flow due to unexpected costs, a revolving credit facility can be a helpful option. Here, you can take what you need, when you need it, and repay it when you have the means (but hopefully quite quickly, as it’s an expensive loan). A business overdraft can achieve a similar thing but on a smaller scale, such as a struggling, low-revenue phone repair shop.
A merchant cash advance has unique use cases, such as overcoming low-sales periods. Companies with strong card sales can usually secure favourable terms. While it’s expensive, it offers peace of mind, making it also great for lifestyle businesses that don’t want the stress of meeting repayments.
Unsecured business loans typically range from £1,000 to £750,000. Online lenders often cover the full range of this, while bank loans may be slightly more conservative. With these two options, it heavily depends on the application (financial health, creditworthiness, etc.)
Revolving credit facilities and merchant cash advances also operate in a large range, between £2,000 and £250,000.
Business overdrafts and credit cards both have a narrower range of available financing, typically between £500 and £50,000.
A secured loan is typically preferred if the business can afford the longer application process, as it is generally more affordable. However, not all companies have the time or enough assets required as collateral. Working capital loans are typically unsecured, which means they can be used to pay staff on time, buy new supplies to fulfil sales, and invest in marketing. This borrowed money helps maintain or increase sales and meet other liabilities.
Unsecured loans can be utilised by larger companies to execute a management buyout or merger, or to finance growth projects and costly marketing campaigns. This is typically found in tech and other sectors where assets that can be used as collateral are scarce.
There are more fees to consider than just interest. Depending on the lender and product, you could be charged for:
While it’s important to verify eligibility before applying for any unsecured loan, the more crucial assessment is determining affordability. Between borrowers and lenders, there is asymmetric information (you know more about your situation than the lender). Therefore, approval doesn’t always equate to being affordable.
Assessing the total cost of credit can help you decide between lenders, but it’s also important to scrutinise the repayment structure and associated fees. Will the loan provide a positive return on investment? If it’s not for growth but survivability, is the loan only delaying insolvency or acting as a more permanent remedy? You must confront the reality of being a personal guarantor.
Finally, consider how urgently you need the funding. You don’t want to unnecessarily get rejected by rushing applications, as this can harm your credit score, nor do you want to rule out a bank loan if there’s a likelihood of approval.
If you default, the lender may increase the interest and/or add fees. They might also send the loan to a collection agency. If unsuccessful, the agency can take you to court and possibly garnish your wages or place a lien against your home. Your personal credit score will also drop.
Speed varies from provider to provider, but typically a decision is made within a day, and funding can be the day after approval.
Lenders often mitigate this risk of unsecured loans by requiring a personal guarantee from the business owner(s), whereby they essentially become “secured” by the owner’s personal assets.
Yes, there are options for a start-up loan. If you have six months of trading history, there may be options with online lenders if you show evidence of early revenue. For startups with zero trading history, a government-backed loan may be your best option, but it will require a strong application. Otherwise, a personal bank loan may be an option.
There are 3 main ways:
Your choice of lenders will be limited, but it is still possible to obtain a business loan. Check out our guide to business loans for bad credit.
Getting a business loan is unlikely without applying to a pre-revenue, government-backed start-up loan scheme. There could be other possibilities within crowdfunding.
Yes. During the application process, a hard check may be performed, which will appear on your credit report. Too many applications or rejections can damage your score.
Missing repayments or having a high credit utilisation ratio can also hurt your business’s credit score.
The primary risk of obtaining an unsecured business loan is overestimating your ability to repay and failing to meet the agreed-upon repayment schedule.
Should your business fail to repay the loan and have signed a personal guarantee, you become responsible. This can lead to the debts being sold to debt collectors, thereby risking the loss of your personal assets or even bankruptcy.
