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If your business needs funding but you don’t want to secure borrowing against property, equipment or other assets, an unsecured business loan could be the right option. With an unsecured loan, lenders assess your business based on its financial performance, trading history and credit profile rather than asking for collateral. This often makes the application process quicker and simpler than a secured loan. However, unsecured loans can vary significantly in cost. Some high street banks offer rates starting from around 7% APR, while specialist lenders may charge up to 99%+. The best option for your business depends on factors such as your credit history, how long you have been trading, how much you want to borrow and how quickly you need access to funds. At Capitalise, we help businesses compare options from more than 130 lenders, making it easier to find the right solution without applying blindly.
What is an unsecured business loan?
An unsecured business loan is a lump sum you borrow and repay in fixed monthly instalments over an agreed term. Unlike a secured loan, you do not need to offer business or personal assets as security. This makes unsecured finance more accessible for many businesses and can speed up the approval process. Most lenders will still require a personal guarantee from at least one company director. A personal guarantee means that if the business cannot repay the loan, the guarantor becomes personally responsible for the outstanding debt.
What can you use an unsecured business loan for?
One of the biggest advantages of an unsecured business loan is flexibility of use. Businesses commonly use unsecured loans for a variety of reasons, such as to improve cash flow, purchase stock, recruit employees, invest in equipment, cover tax liabilities, renovate premises or fund growth initiatives such as marketing campaigns. Lenders will usually ask how you plan to use the funds during the application process, but in most cases they do not place restrictions on how the money is spent once the loan is approved, as long as it is for business purposes.
Unsecured business loan lenders compared: high street banks
High street banks offer the most competitive rates, but they are also the most selective. You will typically need a good credit history, several years of filed accounts, a strong annual turnover and, in many cases, an existing relationship with the bank. If you meet those requirements, a bank loan is likely to be your cheapest funding option. However, approval and funding can take longer than with alternative lenders. If you do not meet a bank's criteria, or need access to funds more quickly, an alternative lender may be a better fit.
Here’s a comparison of some of the most common unsecured business loans offered by high street banks:
Lender | Loan range | Representative APR variable | Terms | Arrangement fee | Early repayment fee |
|---|---|---|---|---|---|
Barclays | £1,000 to £25,000 | 11.2% | 1 to 10 years | None | None |
NatWest | £1,000 to £100,000 | 12.24% | 1 to 7 years | None | None |
Lloyds | £1,000 to £50,000 | 11.2% | 1 to 10 years | None | None |
HSBC | £1,000 to £25,000 | 8.6% for loans over £10,000 | Up to 10 years | None | 1 month plus 28 days interest |
Santander | £1,000 to £50,000 | 11.2% | 1 to 7 years | None | Overpayment at no extra cost |
Metro Bank | £2,000 to £60,000 | 9.6% | 1 to 5 years | None | May apply |
Unsecured business loan lenders compared: alternative and fintech lenders
If your business does not meet a bank's criteria or you need funding quickly, alternative lenders can provide a valuable option. Many fintech lenders use Open Banking data and automated assessments to make faster decisions. While this can improve accessibility, it usually comes with higher borrowing costs. Here’s a comparison of some of the most common unsecured business loan lenders:
Lender | Loan range | Interest rate | Terms | Arrangement fee | Early repayment fee |
|---|---|---|---|---|---|
Funding Circle | £10,000 to £750,000 | From 6.9% APR, representative APR not stated | 6 months to 6 years | Completion fee will apply | None |
iwoca | £1,000 to £1,000,000 | From 1.5% per month; 49% representative APR | 1 day to 24 months | None on 12 month loans; 5% to 6% applies on longer terms | None |
Fleximize | £10,000 to £100,000,000 | From 0.9% - 3.9% per month | 12 to 60 months | None | None |
Capify | £5,000 to £1,000,000 | Factor rate based; average effective APR equivalent typically to 67% | 3 to 12 months | Up to 6% | Not stated |
What does an unsecured business loan actually cost?
The cost of borrowing depends on your business profile and the lender's assessment of risk. As a rough guide, here is what different types of businesses tend to pay:
Business profile | Typical rate range |
|---|---|
Established limited company, strong credit, 2 or more years trading and high turnover | 7 to 12% APR |
Solid businesses with a medium risk credit score or under 2 years trading | 12 to 30% APR |
Short term specialist finance | 30 to 99%+ APR |
When comparing lenders, it is important not to focus solely on the interest rate. Many lenders charge arrangement or completion fees. While most high street banks do not charge these fees, some alternative lenders do. Depending on the loan size, these costs can add thousands of pounds to the total amount repaid. You should also review any early repayment charges. Some lenders allow you to repay early without penalty, while others charge additional interest or fees if you settle the loan before the agreed term ends.
What do lenders look at when they assess you?
Understanding what lenders are looking for makes the whole process less daunting. Most lenders are assessing broadly the same things.
Who can get an unsecured business loan?
While criteria does vary, most mainstream unsecured lenders are looking for broadly the same things:
Sole traders can still access unsecured business finance through many lenders, although some providers have changed their lending criteria in recent years. If your business has experienced credit difficulties, funding may still be available. Several alternative lenders assess applications individually rather than relying on strict automated credit rules. While borrowing costs may be higher, approval is often still possible.
How to compare lenders without affecting your credit score
When comparing business loan options, it is worth understanding how lenders assess applications. Most formal loan applications involve a hard credit search, which is recorded on your credit file. If you apply to several lenders individually, multiple hard searches can appear on your record within a short period. A good approach is to use a platform that matches your business with suitable lenders through a soft search. At Capitalise, one application allows you to compare options from more than 130 lenders without impacting your credit score. Our funding specialists help you understand the true cost of each offer so you can compare lenders based on total borrowing costs rather than headline rates alone. You can also use our business loan calculator to model repayments before you start.
Want to see your unsecured loan options?
At Capitalise, we work with a panel of more than 130 lenders, including high street banks, challenger banks and specialist alternative finance providers. When you apply, you'll be supported by one of our dedicated funding specialists, who will guide you through every step of the process. Apply today to explore your options and get started.
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