Guide
Alternatives to a Secured Business Loan
When it’s worth looking beyond secured lending
Secured finance isn’t always the right fit. You might not have a suitable asset, want to avoid pledging one, or need funds faster than a valuation and legal charge allow. A few common alternatives, each with a different trade-off against a secured business loan:
Unsecured business loans
The most direct alternative. Priced on trading history and cash flow rather than collateral, generally faster to arrange, but smaller amounts and a higher rate. See unsecured business loans for how eligibility and pricing differ, or our full comparison if you’re weighing both.
Asset finance
Rather than borrowing against an asset you already own, asset finance funds the purchase of a specific new asset, with that asset itself acting as security. If the funding need is a single, identifiable purchase such as machinery or a vehicle, asset finance can be a more direct fit than a secured business loan against an existing owned asset. See our secured business loan vs asset finance comparison for the full breakdown.
Merchant cash advances
An advance repaid as a percentage of future card sales, suited to businesses with strong, predictable card turnover rather than a pledgeable asset.
Invoice finance
Releases cash tied up in unpaid invoices rather than requiring a separate asset, useful for businesses with a healthy but slow-paying customer base. Trade finance is a related option for businesses funding the purchase of stock ahead of sale. See our business loan vs invoice finance comparison for more detail.
Revolving credit facilities
A flexible line of credit you draw against as needed, rather than a fixed lump sum. Better suited to fluctuating working capital needs than a one-off investment.
Business credit cards
For smaller, day-to-day spend rather than a larger funding need, a business credit card is a lighter-weight alternative to any of the above, worth mentioning for completeness even though it won’t replace a business loan for a significant purchase or investment.
Government-backed schemes
For smaller or newer businesses that don’t fit mainstream lending criteria, schemes delivered through the British Business Bank, such as the Growth Guarantee Scheme and Start Up Loans, are worth researching alongside our lender panel.
Cost: the difference between these options
The difference in cost between secured lending and these alternatives usually comes down to what’s backing the finance. Asset finance and invoice finance are typically priced close to secured lending, since both involve a form of security (the new asset, or the invoices themselves). Unsecured loans, revolving credit and business credit cards carry a higher cost of borrowing, reflecting the lack of collateral. Merchant cash advances are priced as a percentage of sales rather than a conventional interest rate, which can make the true annualised cost harder to compare directly, so ask for it converted to a comparable rate before deciding.
How to choose between secured lending and the alternatives
Match the funding type to the need. A one-off, larger investment with an asset available points toward secured lending; smaller or shorter-term working capital needs are usually better served by one of the alternatives above; a specific asset purchase often suits asset finance better than either. Our quick eligibility check can help point you toward the right fit for your specific situation, and our secured vs unsecured comparison covers how much you could borrow either way in more detail.