If you’re looking for a fast, flexible way to fund your business growth without putting up collateral, an unsecured business loan could be the perfect fit for your SME.
Unlike secured loans, these facilities don’t require you to pledge assets such as property, vehicles, or equipment. Instead, approval is based on your business performance, credit history, and affordability.
What is an Unsecured Business Loan?
We specialise in helping UK businesses access finance that fits their needs. In this guide, we’ll cover everything you need to know about unsecured loans, from how they work to their benefits, risks, and eligibility criteria. We’ll also show you how to get started with our finance calculator to compare your options instantly.
Secured vs. Unsecured Business Loans: What’s the Difference?
When exploring business loans in the UK, you’ll quickly notice there are two main categories: secured and unsecured.
- Secured business loans require collateral, such as property, vehicles, or equipment, which act as a safety net for the lender. This lowers the lender’s risk, often resulting in more competitive interest rates. However, they can take longer to arrange and tie up valuable business assets.
- Unsecured business loans don’t require collateral. Instead, the lender evaluates your business’s financial health, turnover, and credit profile. They’re usually quicker to arrange and more flexible, but because they carry more risk for lenders, the interest rates can be higher.
The best option for your business depends on your circumstances, but unsecured loans are particularly useful when you need flexibility and freedom from asset ties.
Why Choose an Unsecured Loan?
Unsecured business loans are an attractive solution for many UK SMEs because they:
- Don’t require assets: ideal if you’re renting premises or don’t own high-value equipment.
- Offer flexibility: funds can be used for almost any business expense, from marketing campaigns to stock purchases.
- Provide speed: with Johnson Reed, you can often access funding instantly through our panel of lenders and own-book lending options.
- Keep assets unencumbered: your property, vehicles, or machinery remain free for other financial arrangements.
This combination of simplicity and flexibility makes unsecured loans one of the most versatile financing options for SMEs.
Risks and Considerations
While unsecured loans are powerful tools, it’s important to consider the potential challenges:
- Stricter eligibility criteria: because there’s no collateral, lenders scrutinise your credit history, affordability, and trading history more closely.
- Higher interest rates: lenders take on more risk, so interest rates often range higher than secured loans.
- Approval times: some banks and credit unions take weeks to approve unsecured loans. We speed up the process by working with a wide lender panel and making instant decisions where possible.
The key to managing these risks is careful financial planning. Our account managers work closely with you to ensure your repayment schedule is sustainable and tailored to your cash flow. Get a free quote here.
Who Can Get an Unsecured Business Loan in the UK?
Most UK SMEs with at least 6–12 months of trading history and steady turnover can apply for unsecured loans. Lenders typically look for:
- Evidence of consistent income.
- Reasonable credit history.
- A solid repayment plan.
We’re more flexible than many traditional banks. As we know that growth opportunities don’t always wait, so we’ll explore every option available to fund your next move, even if your profile doesn’t fit the rigid criteria of high-street lenders.
Common Uses for Unsecured Business Loans
Unsecured loans can be applied to a wide range of business needs, such as:
- Managing cash flow gaps.
- Buying stock or raw materials.
- Funding marketing campaigns or a website upgrade.
- Covering short-term expenses like refurbishment or small equipment purchases.
- Acting as a bridge loan while awaiting customer payments.
Because funds are not tied to specific assets, you can adapt them to whatever your business needs most.
Alternatives and Other Business Funding Options
An unsecured loan isn’t the only way to fund your business. Depending on your goals, other finance types may be a better fit:
- VAT and Corporation Tax Loans – spread HMRC payments into manageable monthly instalments with our tax loans.
- Equipment and Asset Finance – invest in essential items like vehicles, machinery, or IT systems without draining cash flow. See more about our asset finance solutions.
- Lease Purchase and Hire Purchase Agreements – acquire assets while benefitting from significant tax advantages.
Exploring these options alongside unsecured loans ensures you find the right funding structure for your business.
Unsecured Loan in Action
At Johnson Reed, we recently supported a client who needed to secure specialist equipment from a Chinese supplier. The supplier required a substantial upfront deposit of £30,000, but traditional asset finance wasn’t possible as the equipment hadn’t yet arrived in the UK. To keep the deal moving and give the business the flexibility it needed, we provided an unsecured loan to cover the deposit. This allowed our client to confidently progress with their order without cashflow strain, knowing we’d structured finance around their specific circumstances.
FAQs About Unsecured Business Loans
What is the average interest rate for an unsecured loan in the UK?
Rates vary widely, typically ranging between 8–40%, depending on your business profile and the lender.
Do I need a perfect credit score?
Not at all. A clean credit history helps, but many lenders (including Johnson Reed’s panel) are open to businesses with less-than-perfect scores if affordability is clear.
How quickly can I access funds?
With Johnson Reed, you can often get an instant decision—much faster than high-street banks.
Are unsecured business loans available for startups?
Generally no, as lenders prefer at least 6–12 months’ trading history. However, UK startups can explore the British Business Bank’s Start Up Loan Scheme, and Johnson Reed also supports new businesses through alternative options like equipment finance.
What documents are required?
Typically, directors’ details (full name, date of birth, and 3-year address history), your latest year-end accounts, and sometimes recent bank statements.
Will it affect my personal credit rating?
No. Funding is secured through your limited company and doesn’t impact your personal credit file.
Get Started with Johnson Reed
Unsecured business loans can provide the speed, flexibility, and freedom your SME needs to grow. Whether you want to smooth cash flow, fund expansion, or cover urgent expenses, Johnson Reed can help you secure the right finance with minimal hassle.
You may try our Finance Calculator for an instant quote and explore repayment options tailored to your business. Ready to talk to an expert? Contact us directly.
