Compare secured and unsecured business loans, side by side

A secured business loan is commercial finance that requires you to pledge a valuable business or personal asset, such as property, machinery or vehicles, as collateral. The lender places a legal charge over the asset for the loan term, which lowers their risk and typically means you can borrow larger amounts over longer periods at a lower interest rate than unsecured finance.

The main downside is that your pledged asset is at risk if your business cannot maintain repayments. The lender can seek to repossess and sell it to recover their money. Secured loans also typically take longer to arrange, since the lender needs to value and legally charge the asset before releasing funds.

Interest paid on a business loan used wholly for business purposes is generally treated as an allowable expense and can reduce your taxable profit. Capital repayments themselves are not deductible. Rules vary by structure and use of funds, so this should be confirmed with your accountant against your specific circumstances.

Unsecured loans are usually faster to arrange because there's no asset to value and legally charge, but lenders compensate for the extra risk with smaller loan sizes, shorter terms and higher rates. Secured loans take longer but generally offer larger amounts, longer terms and lower rates because the lender's risk is reduced by the collateral.