Do I need collateral for a business loan?

2 min read

Not alwaysMuch lending is unsecured

Cash flowUnsecured lending assesses trading

No PGPersonal assets stay out of it

Secured versus unsecured

Secured lending is backed by a specific asset — property, equipment, stock — that the lender can claim if the loan isn't repaid. Unsecured lending isn't tied to a named asset; the lender instead relies on the company's trading and creditworthiness. The full comparison is in the difference between a secured and unsecured business loan.

How unsecured lending decides

Without collateral to fall back on, an unsecured lender leans harder on the company's cash flow — revenue through the bank account, affordability of repayments, and credit profile. That's exactly how Credicorp assesses a company, and it lends to the business with no personal guarantee, so neither company assets nor your personal ones are pledged. Test your position with the affordability calculator.

When security may still apply

Larger facilities, or lending to companies with limited trading history, are more likely to involve some form of security or guarantee. If a strong cash flow can carry the borrowing, unsecured is often available; if the ask is large relative to the company's size, a lender may want comfort beyond trading alone. For the wider picture, see what lenders check on a business loan application.

Frequently asked questions

Is unsecured lending more expensive than secured?

It can be, because the lender takes on more risk without collateral, which may be reflected in pricing. But the trade-off is that no asset is tied up. Compare the whole cost and terms, not just the rate, when weighing the two.

Does no collateral mean no personal guarantee either?

Not automatically — they're separate things. Some unsecured loans still ask for a personal guarantee. Credicorp's lending is unsecured and takes no personal guarantee, but always confirm both points with any lender.

What can I do if I have few assets to offer?

Focus on the strength of your cash flow, since that's what unsecured, company-only lenders assess. Clean bank activity, steady turnover and a clear purpose matter more than the assets on your balance sheet.