Looking for an infusion of capital to grow your business but don’t have assets to put up as collateral? Unsecured business loans allow you to borrow without pledging any business assets – making them a flexible financing option.

With loan amounts ranging from £1,000 to £500,000, competitive interest rates, and quick access to funding, unsecured loans present an accessible way for businesses to obtain capital.

But not all unsecured business loans are created equal.

With many lenders offering unsecured financing, comparing interest rates, fees, eligibility criteria, and other loan terms is important to find the best fit for your business. My guide compares ten top UK providers of unsecured business loans on key factors, including:

  • Loan amounts available
  • Interest rates and Representative APR
  • Loan term lengths
  • Eligibility requirements
  • Approval and funding timelines
  • Early repayment policies
  • Additional fees or charges

Whether you need £5,000 or £100,000, these side-by-side comparisons will help you shop smart and secure the most competitive unsecured loan for your capital needs.

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What is an Unsecured Business Loan?

An unsecured business loan is a type of loan that does not require the borrower to provide collateral. This means that the lender does not have any assets to seize if the borrower defaults on the loan.

Unsecured business loans are typically offered to businesses with good credit histories, as lenders are taking on more risk by not having any collateral to secure the loan.

Unsecured business loans can be a good option for businesses that do not have many assets to pledge as collateral, or for businesses that need funding quickly. However, they typically have higher interest rates than secured business loans, as lenders are taking on more risk.

Here are some of the key features of unsecured business loans:

  • No collateral required: The borrower does not need to provide any assets as collateral.
  • Retain ownership of assets – Businesses get to keep full ownership and use of all their assets versus tying them up as collateral.
  • Easier to obtain for newer businesses – Startups and newer businesses with few assets can still qualify for unsecured loans
  • Fast approval process: The approval process for unsecured business loans is typically faster than the approval process for secured business loans.
  • Flexible repayment terms: Unsecured business loans typically offer flexible repayment terms.
  • Higher interest rates: Unsecured business loans typically have higher interest rates than secured business loans.
  • Stricter credit requirements: Lenders typically have stricter credit requirements for unsecured business loans than for secured business loans.

If you are considering an unsecured business loan, comparing different lenders and loan terms is important to find the best option for your business. You should also carefully consider the higher interest rates and stricter credit requirements before applying for an unsecured business loan.

Types of unsecured business loans available in the UK

There are several different types of unsecured financing options for businesses in the UK marketplace

Most unsecured loans will have defined repayment schedules with set monthly payments and total repayment periods ranging from a few months up to 7 years. Interest rates and qualification criteria will differ between loan types and providers.

Loan TypeDescriptionRepayment TermsInterest Rates
Term LoansLump sum with fixed monthly repayments over 1-5 yearsFixedVaries, often 6-12%
Business Credit CardsRevolving credit up to a set limitMinimum monthly paymentTypically higher, ~15-25%
OverdraftsLump sum repaid by the percentage of credit card salesNo fixed paymentsVariable rates
Merchant Cash AdvancesLump sum repaid by a percentage of credit card salesFluctuates based on salesFactor rates applied
Peer-to-Peer LoansLoans from non-bank investors via P2P platformsFixedSet by investors, often 4-10%

Top 10 Unsecured Loan Providers

Here’s a comparison table for these different types of unsecured business loans:

Loan ProviderAmountFeaturesEligibility CriteriaRepaymentFeesTime to Funding
Uncapped£50,000 – £10 millionNo securities, guarantees, dilutionOnline model businessesDaily, weekly, monthly schedulesFlat fee as low as 2%24 hours
Cubefunder£5,000 – £100,000Can be used for any business purposeLtd company in England/Wales, min. £4k monthly turnover, min. 3 months in businessFlexible£395 for <£40k, £595 for >£40k48 hours
Capify£5,000 – £500,000No assets or security required, simple renewal processTrading over 12 months, min. £10k monthly turnoverFixed regular repaymentsUnknown24 hours
Barclays£1,000 – £100,0006-month repayment holiday option, no early repayment feesFinancial history info required12-60 monthsUnknown48 hours
Natwest£1,000 – £50,000No early repayment or closure charges, online application for existing customersUnknown1-7 years (up to 10 on request)Unknown24 hours
LloydsUp to £25,000No early repayment fees, application for existing customersUnknownVaries12.7% APR (variable or fixed)48 hours
Santander£2,000 – £25,000No interest for first 12 months, no arrangement fees, preferential rate for eligible customersRequires Santander business current accountFixed monthly repayments over term7.9% APRFew days
Bank of ScotlandUp to £25,000No early repayment fees, application for existing customersUnknownVaries12.7% APR (variable or fixed)48 hours
Metro BankUp to £25,000No arrangement feesUnknown1-5 years9.6% APRUnknown
TSB£1,000 – £1,000,000Capital repayment holidays, fixed rate for termUnknown1-10 yearsUp to 1.5% of loan amountUnknown

Please note that the features, eligibility criteria, repayment schedules, fees, and time to funding can vary significantly between lenders and may also depend on the specific circumstances of the business applying for the loan.

Uncapped:

  • Unsecured loans from £50,000 to £10 million for eligible online businesses like SaaS, ecommerce, subscriptions, etc.
  • Flat fees as low as 2% of the loan amount. No ongoing interest rates.
  • Fast eligibility decisions in 30 seconds. Offers typically made within 24 hours.
  • Flexible daily, weekly or monthly repayment schedules.
  • Funds can be used for any business purpose with no restrictions.

Cubefunder:

  • Unsecured term loans from £5,000 to £100,000 for UK limited companies.
  • Minimum 12 months trading history and £4,000 monthly turnover required.
  • Fixed admin fees of £395 for loans under £40,000 and £595 for loans over £40,000. No other fees.
  • Flexible repayment terms available. Funds accessible within 48 hours of approval.
  • Can be used for any business purpose. No early repayment fees.

Capify:

  • Unsecured business loans from £5,000 to £500,000.
  • Need 12+ months trading history and minimum £10,000 monthly turnover.
  • Fixed repayments terms from 1-5 years.
  • No business assets required as security. Fast, simple application process.
  • Funding available as soon as 24 hours after approval.

Barclays:

  • Unsecured term loans from £1,000 to £100,000 for UK SMEs.
  • Fixed interest rates and repayment terms of 12-60 months.
  • Option for 6-month repayment holiday (interest still accrues).
  • Quick approval and funding within 48 hours of paperwork.
  • Financial statements and records required. No early repayment fees.

NatWest:

  • Unsecured loans from £1,000 to £50,000 for small businesses.
  • Fixed interest rates and repayment terms of 1-10 years.
  • Existing NatWest customers can apply online in under 10 minutes.
  • Quick approval and funding within 24 hours.
  • Interest rates and APR can be checked online. No early repayment fees.

Lloyds Bank:

  • Unsecured loans up to £25,000 for small businesses.
  • Representative APR of 12.7% (fixed or variable).
  • Existing Lloyds customers can apply online in minutes.
  • Quick approval and funding within 48 hours.
  • Interest rates based on creditworthiness and loan amount. No early repayment fees.

Santander:

  • Unsecured loans from £2,000 to £25,000 over 1-5 year terms.
  • Representative APR of 7.9%. No fees charged.
  • No interest for the first 12 months. Fixed monthly repayments.
  • Must have Santander business account. Preferential rates for some customers.
  • Quick approval and funding within few days.

Bank of Scotland:

  • Unsecured loans up to £25,000 for small businesses.
  • Representative APR of 12.7% (fixed or variable).
  • Existing customers can apply online in minutes.
  • Quick approval and funding within 48 hours.
  • Interest rates based on creditworthiness and loan amount. No early repayment fees.

How Do Unsecured Business Loans Work?

Unsecured business loans are typically offered to businesses with good credit histories, as lenders are taking on more risk by not having any collateral to secure the loan.

To obtain an unsecured business loan, you will need to submit a loan application to a lender. The lender will then assess your credit history and business financials to determine your eligibility for the loan. If you are approved for the loan, the lender will offer you loan terms, including an interest rate and repayment schedule.

The interest rate on an unsecured business loan will vary depending on the lender and your credit history. Fixed-rate loans offer a consistent interest rate throughout the life of the loan, while variable-rate loans have an interest rate that can fluctuate over time.

It is important to carefully read the terms and conditions of any unsecured business loan before you sign the paperwork. This includes understanding the interest rate, repayment schedule, and any fees or charges associated with the loan.

Tips for Qualifying for an Unsecured Business Loan

When applying for an unsecured loan, follow these tips to strengthen your chances of approval and securing the best rates:

  • Maintain a strong business credit score – Lenders will thoroughly evaluate your business creditworthiness. Keep credit utilization low and make payments on time.
  • Highlight steady business revenue – Provide several years of financial statements showing consistent revenue and cash flow. Higher revenues strengthen repayment ability.
  • Prepare a solid business plan – Clearly explain how the loan will be used to support growth and profitability. Convince the lender you can repay it.
  • Keep personal credit scores high – For sole proprietors or small companies, your personal credit will be considered too. Maintain responsible personal credit habits.
  • Have collateral to offer, if needed – Some lenders may offer better rates if you can pledge business assets as a secondary source of repayment.
  • Get your documentation ready – Have required documents like financial statements, tax returns, and bank records ready to go to expedite the application process.
  • Comparison shop – Check rates and terms from multiple lenders. An online loan marketplace like Funding Options can help you easily compare your financing options.

With strong business financials and preparation, an unsecured loan can provide affordable financing to take your company to the next level.

Pros and Cons of Unsecured Business Loans

Pros

  • Flexible Duration – Repayment schedules can range from as short as a month to as long as five years, depending on your business needs.
  • No Asset Security Required – Eliminates the need to commit valuable business assets as collateral.
  • Minimal Administration – The process is straightforward and efficient, requiring minimal paperwork for arrangement.
  • Prompt Access to Funds – Quick release of loan funds to promptly enhance your business’s cash flow.
  • Dischargeable in Insolvency – Unsecured loans are typically dischargeable in cases of insolvency, a feature not commonly found with secured loans.
  • Reusable Funding Source – Once repaid, unsecured loans can often be drawn upon again, serving as a renewable source of capital.
  • Flexible Repayment Terms – Offers the convenience of tailored repayment schedules to suit your business’s financial situation.

Cons

  • Higher interest rates – Lenders take on more risk
  • Lower loan amounts – Approvals capped due to higher risk
  • Stricter eligibility standards – Strong revenue and credit score required
  • Potentially requires a personal guarantee – Personal assets may still be at risk
  • Missed payment penalties – Can damage business credit score
  • Less tax deductible – Potentially fewer interest deductions

Can I get a Business Loan Without a Personal Guarantee?

Getting a business loan without a personal guarantee in the UK is extremely rare, and finding lenders willing to provide such a loan won’t be easy.

Some options include government-backed loans, such as those offered by the British Business Bank, and crowdfunding platforms, which allow investors to provide funding to businesses in exchange for a share of the company’s equity.

Additionally, some alternative lenders, such as peer-to-peer lending platforms, may also offer business loans without a personal guarantee, although the terms and interest rates may be less favourable than those offered by traditional banks.

Personal Guarantee Clauses in Business Loans

Personal guarantee documents, typically signed by company directors, will place a personal asset as security for a business loan in the event of default.

It’s somewhat paradoxical that even so-called ‘unsecured’ loans require these, since they are themselves a form of security.

They should never be signed lightly since these legal documents are specifically designed to breach the corporate veil.

Where personal guarantees are required, we always recommend the use of personal guarantee insurance policies. The company can pay these and offer a powerful level of reassurance for directors who have put their family homes on the line for the sake of business growth.

Eligibility Criteria for No Personal Guarantee Business Loans

As far as we know, no lenders will offer genuinely unsecured loans without a guarantor. The closest you’ll find will be something like Paypal Working Capital.

Because Paypal can see very clearly how much money is passing through someone’s account, they are prepared to free up capital based on past performance.

You can get a working capital advance of up to 40%, with repayments taken as a fixed percentage from each future sale until the loan is repaid.

To be eligible for PayPal Working Capital, you need to meet the following conditions:

  • You’ve had a PayPal Business account for at least 3 months.
  • Your business processes at least £9,000 in eligible PayPal sales annually.
  • Your business is registered in the United Kingdom.
  • You haven’t failed to repay any prior PayPal Working Capital cash advances.

Can you get an Unsecured Loan with Bad Credit?

Obtaining an unsecured loan with bad credit is difficult since the lender must assess risk before agreeing on the funds.

Where your business’s credit history indicates high risk, it may still be possible to agree on a loan, but the amount will be lower and the interest likely higher as a result. Good credit is always a precursor to being able to secure higher levels of funding.

There are lenders out there who specialise in higher-risk lending, so it’s certainly possible, assuming a personal guarantee can be offered.

As long as the lender perceives the loan repayments to be affordable, a range of finance options do exist, so contact us to find out more about the right provider for your business needs.

What are the Average Interest Rates for Unsecured Business Loans?

Interest Rates will fluctuate widely depending on:

  • the amount of the loan
  • duration
  • your company credit score
  • Your business history, how long you’ve been trading and overall reputation

Currently, typical Rates range from around 1.3% APR.

Enterprise Finance Guarantee Loans

For companies with no proven track record or who have been turned down for other forms of business finance due to poor credit, the British business bank-backed Enterprise Finance Guarantee may be the ideal way to get your foot on the finance ladder.

With EFG-backed finance, the government essentially agrees to take on primary responsibility for loans which default, thereby offering heavily reduced risk to lenders. Eligibility for EFG loans rests solely with the provider, who would follow governmental criteria.

EFG scheme loans mean the borrower pays fees to the lender exactly as usual and a quarterly fee to the government. This extra fee can mean this type of finance is more expensive than some other loans, but since it makes loans available to businesses who wouldn’t otherwise have qualified, it is a popular option for many.

Compare Business Loans and Find the Best Unsecured Finance Quote

It isn’t quite as simple as saying that the lowest business loan rate equals the best deal for any company. In some cases, slightly higher interest rates may actually mean a far better overall deal.

We’ve found that a wide range of factors combine to mean that each business situation will have its own best match with a particular provider.

Contributory factors include:

  • Amount of Paperwork
  • Responsiveness of lender
  • Speed of Payment – many promise ‘within 48 hours’, but do they actually deliver?
  • Charges, Rates and Fees
  • Business Sector
  • Do they Offer Flexible Repayment Terms?
  • Are there penalties for early repayment?

Unsecured Business Loans for Startups

Startups at generally in a difficult category for finance. Without a trading history or assets, many struggle to find the finance necessary to catalyse growth.

For smaller amounts (£25k or less) the government’s startup loan scheme is worth investigating.

For larger amounts, the presence of a director’s personal guarantee is essential, but in these cases, it is possible to find good deals on loans of up to 150k. Contact us for details.

A carefully prepared business plan, clean personal credit score, and income projects will be necessary in all cases.

Alternatives to Consider

TypeProsCons
Secured LoansLower rates, larger amounts, longer termsRequire valuable collateral
Enterprise Finance Guarantee LoansGovernment-backed, lower qualificationsMore expensive, limited amounts
Business Lines of CreditRevolving credit, pay interest on what you useLower approvals, need to renew frequently
Merchant Cash AdvancesNo credit checks neededVery high equivalent interest rates, daily repayments
Equipment FinancingUse equipment as collateralLimited to equipment needs, complex tax considerations
Business Credit CardsQuick access to smaller amounts, convenientHigh interest rates, need to pay off monthly

Unsecured Business Loan FAQs

Since even ‘unsecured’ business loans require a personal guarantee, there is substantial risk in taking out a loan, as with any form of finance. Defaulting on the loan will cause the lenders to call in the guarantee, so you must be sure you can pay the loan back before securing the finance. Read more on the Business Expert website.

Is it Possible to Get an Unsecured Loan Without a Personal Guarantee?

Practically speaking, borrowing money from any private lender without offering security is impossible. The government start-up loans scheme does offer finance of up to 25k, without guarantee, providing their other criteria are met.