Unsecured business loans: borrowing without putting property up

Not every owner wants to hand the bank a mortgage over the house, and many don’t own one. Renters, new directors and people who simply don’t want the family home on the paperwork all face the same question: can the business borrow on its own merit? Often it can.

The idea behind ‘unsecured’

Secured lending says: if repayments stop, the lender can turn to a specific asset. Unsecured lending says: we are lending on the strength of the business’s earnings and the people behind it. Without an asset to fall back on, the lender must be more careful about the account and the owner’s commitment.

That trade is why unsecured lending is usually capped well below secured lending, and why guarantees are common.

What gets examined

An unsecured assessment is mostly a close read of the business account. Expect attention on:

1. The money coming in. Size, regularity and how many different customers it represents.
2. The money going out. Wages, rent, supplier bills and especially other debt repayments.
3. How the account behaves. Time overdrawn, bounced payments, surprise withdrawals.
4. How long the business has traded. The age of the NZBN and the account.
5. Tax. Whether GST and PAYE are being paid on time or arranged.

Our bank statements guide goes through each in more depth, including how to explain the awkward bits.

Unsecured against secured, side by side

	Unsecured	Property-secured
Amount	$5k – $500k	$20k – $5m
Lender relies on	Earnings and the owner	The asset as well
Documents	Statements, ID, NZBN	Plus property and title
Speed	Same day possible, smaller sums	$20k – $250k same day possible
Suits	Steady trading, moderate need	Bigger or more urgent need

See what your account might support. Start the 60-second enquiry.

How the amount is decided

There is no secret formula, but the logic is consistent: the repayment must fit inside your quietest realistic stretch, with room to spare. Two businesses with the same yearly turnover can be offered quite different amounts. One banks a little every day from many customers. The other banks two huge payments a year. The first is easier to lend to.

Things that tend to increase what you can borrow:

• deposits that arrive regularly and from many sources
• an account that rarely falls short
• few existing repayment commitments
• a clear purpose and an obvious path to repayment

Guarantees: what to know

Most unsecured lenders ask directors or owners to guarantee the debt personally. That does not mean property is mortgaged, but it does mean you could be personally liable if the business cannot pay. Read what the guarantee covers, whether it is limited, and what happens if you leave the company. It is worth a short conversation with your lawyer.

Loan or line?

Unsecured funding can be a fixed loan or a revolving cash line. A loan suits a single purchase; a line suits shortfalls that return. Our quiz helps you decide in four questions.

Judging the price

Skip hunting for one magic number. Instead, line offers up against these:

• total dollars repayable
• cash leaving the account each week
• fees in dollars
• what early repayment does to the cost

Offers that look similar at first glance often differ a lot on these measures.

When unsecured isn’t the best tool

• The sum is too large for your takings. Repayments will squeeze wages and suppliers. Consider property-backed cash.
• You already carry several daily debits. Adding another can worsen things. See the cash advance alternatives.
• The gap ends with a lump sum. If a sale or a large contract payment is coming, a structure with nothing due until then might protect cash flow better.

Preparing your application

A tidy application moves quickest. Collect statements for every business account for the period requested, photo ID for each director, your NZBN and a note of any large or unusual transactions. List current loans and advances with rough balances. Decide in advance what you will say about tax, credit history and anything the statements might raise. Honest, organised answers let the assessor reach a view in hours rather than days, and a business that presents clearly is usually offered better terms than one that makes the lender dig.

An illustrative example

Illustrative only. A bakery in Dunedin banks takings daily, with a lift each December. The owner rents the shop and wants a new deck oven before Christmas. An unsecured loan sized on twelve months of deposits pays for the oven, and weekly repayments align with weekly takings. By the time the main rush arrives, the oven is already earning.

Next step

Tell us the amount, the reason and roughly when your own cash returns. It takes a minute, asking involves no credit check and your details stay with a single team. A real person reads what you’ve sent and calls with options.

Honest figures on turnover and commitments are what let us give you a useful first answer.

Check my unsecured options →