Key Takeaways
- Asset based lending uses business or personal assets as security, while unsecured business loans rely primarily on your business's ability to repay.
- Secured lending often provides lower interest rates, larger borrowing amounts, and longer repayment terms than unsecured finance.
- Unsecured business loans are usually approved faster because they do not require asset valuations or full documentation.
- The right loan depends on your business goals, available assets, funding timeline, and cash flow.
- Many Australian businesses use both secured and unsecured facilities together to balance flexibility with long term borrowing capacity.
- Working with a finance broker like Dark Horse Financial gives you access to lenders offering both secured and unsecured products, helping you choose the option that best suits your circumstances.
Two Different Approaches to Business Finance
Choosing between asset based lending and an unsecured business loan is common for Australian businesses looking for funding. Both can provide funding for growth, working capital, acquisitions, or unexpected expenses, but they work in very different ways.
The biggest difference is whether you provide security.
Asset based lending is secured against an asset that has value. Depending on the lender and loan type, that security could include commercial property, residential property, machinery, vehicles, accounts receivable, or other business assets.
An unsecured business loan does not require security. Instead, lenders assess factors such as your business revenue, trading history, existing liabilities, and overall ability to service the debt.
Many business owners assume unsecured finance is always the better option because they do not have to offer security. Others believe secured lending is automatically cheaper and therefore the obvious choice. Neither assumption is always correct.
A business purchasing a $2 million warehouse will have very different financing needs from a marketing agency looking for $80,000 to cover short term cash flow. The best solution depends on why you need funding, how quickly you need it, and what assets your business owns.
How Asset Based Lending Works vs Unsecured Lending
Understanding how each loan works makes it much easier to decide which option suits your business.
How Does Asset Based Lending Work?
Asset based lending is finance secured against assets owned by you, your business, or in some cases a related entity or guarantor. These assets provide the lender with additional protection if the loan is not repaid.
Depending on the lender and the type of finance, acceptable security may include:
- Commercial property
- Residential property
- Plant and equipment
- Vehicles
- Outstanding invoices
- Machinery
- Other valuable business assets
The lender assesses both the value, quality, marketability, age, and condition of the security before determining how much it is prepared to lend. Factors such as depreciation, ownership, and market value all influence the available loan amount.
Asset based lending is often used for:
- Business expansion
- Property purchases
- Equipment acquisition
- Working capital
- Debt consolidation
- Funding large projects
- Refinancing existing business debt
Because the lender has security supporting the facility, borrowing limits are generally much higher than unsecured alternatives. Repayment terms may also extend over many years, reducing monthly repayment pressure. Most lenders still assess serviceability, meaning security alone does not guarantee approval.
How Unsecured Business Loans Work
An unsecured business loan removes the need to provide security.
Instead of valuing assets, lenders focus on the strength of your business and in particular your cash flow and average cash balance. They typically assess:
- Business revenue
- Cash flow
- Time in trade
- Credit profile
- Existing debts
Many lenders require businesses to have traded for at least 12 months, although requirements differ between lenders. Some specialist lenders also consider businesses with imperfect credit histories.
Without security reducing the lender’s risk, unsecured loans generally feature higher rates, starting at 12.95% and are capped around $1.5M. Most non-bank unsecured lenders have a maximum lending rate below $500,000. However, these attributes are offset by benefits such as speed of approval and simple applications that don’t normally require documents. Depending on the lender, applications may require only read-only bank statements, while others request additional financial information.
For businesses needing immediate working capital, this trade off can be worthwhile. Many unsecured loans can be approved within one business day because there is no need for property valuations or extensive security documentation.
Secured vs Unsecured Business Loan Comparison
| Feature | Asset Based Lending | Unsecured Business Loan |
|---|---|---|
| Security Required | Yes | No |
| Approval Speed | Moderate | Usually faster |
| Interest Rates | Generally lower | From 12.95% |
| Maximum Loan Size | Usually larger | Most non-bank lender caps are below $500,000 |
| Loan Terms | Often longer | Max 5 – 7 years |
| Asset Valuation Required | Yes | No |
| Requirements | Proof of income, proof of ownership of the asset | Read only view of business bank account statements |
| Suitable For | Large purchases, expansion, long term funding | Working capital, short term opportunities, urgent funding |
Comparing Costs, Speed, and Borrowing Limits
When a loan is backed by security, the lender has a more direct way to recover some or all of the outstanding debt if repayments are not made. That lower level of risk often results in lower interest rates, higher borrowing limits, and longer repayment terms.
With an unsecured loan, the lender is relying almost entirely on your business’s financial strength and future cash flow. Since there is no asset securing the facility, lenders generally charge more for the additional risk and place tighter limits on how much you can borrow.
Interest Rates and Overall Cost
The advertised interest rate only tells part of the story. Asset based loans may offer lower rates, but they’re not always the best choice for every situation. Paying a slightly higher interest rate may be worthwhile if fast access to funds allows you to secure new work, purchase discounted stock, or solve a cash flow problem before it affects your business.
Instead of focusing solely on interest rates, consider the total cost of borrowing, including fees and the total cost of interest over the life of the loan.
Approval Speed
For many businesses, speed is just as important as price. Unsecured loans are usually approved more quickly because there is no need for property valuations or detailed assessments of business assets. Many lenders use digital bank statement analysis and automated credit assessment, allowing approvals in as little as 24 hours in suitable cases.
Asset based lending typically takes longer because lenders need to confirm:
- Ownership of the security
- Current market value
- Existing debt secured against the asset
- Whether the security meets lending policy
Desktop property valuations can speed up the process, although larger or more specialised assets often require formal valuations before approval.
If timing is critical, this difference can heavily influence your decision.
Borrowing Limits
Another major difference is how much you can borrow.
Because asset based lending uses security, lenders can often provide substantially larger facilities than they would on an unsecured basis.
The exact amount depends on factors including:
- The value of the security
- Your business income
- The lender’s loan to value requirements
- The type of asset being offered
Unsecured business loans can still provide significant funding. Some lenders offer facilities of up to $4 million for strong businesses, although approval depends heavily on revenue, profitability, cash flow, and overall financial position.
Businesses planning major acquisitions, purchasing commercial property, or investing in expensive equipment often find that secured lending provides the borrowing capacity they need.
When Asset Based Lending Is the Clear Winner
Asset based lending is often the strongest option when your business owns valuable assets and you’re looking for larger amounts of finance or lower long term borrowing costs.
While every application is assessed individually, secured lending is commonly the preferred solution in several situations.
You’re Making a Large Investment
Major purchases often require funding well beyond the limits available through unsecured lending.
Examples include:
- Purchasing commercial property
- Buying another business
- Expanding into additional locations
- Investing in large scale manufacturing equipment
- Acquiring heavy vehicles or machinery
Using security can provide access to significantly larger loan amounts while spreading repayments over a longer period.
You Want Lower Borrowing Costs
Businesses planning to hold a loan for several years often benefit from the lower interest rates generally available through secured lending.
Even a modest difference in interest rates can reduce borrowing costs considerably over the life of a larger loan.
You Have Valuable Business Assets
Many businesses are asset rich but cash flow constrained.
For example, you may own:
- Machinery
- Commercial vehicles
- Inventory
- Property
- Outstanding invoices
Asset based lending allows you to unlock the value already sitting within your business instead of leaving those assets unused from a financing perspective.
You Need Longer Repayment Terms
Longer repayment periods generally mean lower regular repayments.
For businesses investing in assets that will generate income over many years, matching the loan term to the life of the investment can make cash flow easier to manage.
You’re Planning Long Term Growth
Businesses expanding steadily often prioritise borrowing capacity over approval speed.
If your plans include opening additional locations, purchasing larger premises, investing in production capacity, or acquiring equipment, secured lending often provides a better solution fit than relying entirely on unsecured finance.
When an Unsecured Loan Makes More Sense
Asset based lending is not always the right solution. Plenty of businesses either do not have suitable assets to offer as security or simply prefer to keep those assets available for future borrowing.
An unsecured business loan can provide fast access to funding without the additional steps involved in valuing and securing assets.
You Need Funds Quickly
Timing can make all the difference. Because unsecured loans don’t require property valuations or security documentation, many lenders can approve applications within one to several business days, with some offering approvals within 24 hours for suitable borrowers.
If accessing funds quickly is your highest priority, unsecured finance is often the better choice.
You Don’t Want to Use Your Assets as Security
Some business owners have property or equipment they could use as security but deliberately choose not to.
Keeping those assets unencumbered may provide greater flexibility later if you decide to:
- Purchase commercial property.
- Expand into new locations.
- Refinance existing facilities.
- Obtain larger secured finance in the future.
Using an unsecured loan allows you to preserve that asset for other purposes while still accessing the funds you need today.
Your Funding Requirement Is Not Too Large
Not every business needs a million dollar facility.
If you’re borrowing to cover:
- Seasonal cash flow.
- Marketing campaigns.
- Staff recruitment.
- Stock purchases.
- Minor business improvements.
An unsecured facility may be more practical than arranging security for a comparatively modest loan amount.
You Want a Simpler Application
Secured lending usually involves additional documentation relating to the asset being offered as security.
An unsecured application generally focuses on your business’s financial position instead.
Depending on the lender, this may only require a read only view of your business bank account statements and a credit check.
Combining Both: Using Multiple Facilities
Many established businesses use multiple lending facilities at the same time, with each serving a different purpose. Matching the right type of finance to each requirement can improve cash flow, reduce borrowing costs, and provide greater flexibility as the business grows.
For example:
| Situation | Better choice |
|---|---|
| Buying machinery | Asset based |
| Cover payroll | Unsecured |
| Buying warehouse | Asset based |
| Seasonal cash flow | Unsecured |
| Debt consolidation | Asset based |
Each facility supports a different part of the business without forcing one loan product to do everything.
A wholesale business might use commercial property as security for a long term expansion loan while maintaining an unsecured line of credit for seasonal inventory purchases.
Likewise, a transport company could finance new vehicles through equipment finance while relying on an unsecured working capital facility to cover fuel, wages, and maintenance during quieter periods.
Rather than asking unsecured loan or secured loan better, a more useful question is whether each loan is being used for the purpose it is best suited to. Many successful Australian businesses use both throughout different stages of their growth.
Can You Qualify for Both?
Yes. Many businesses qualify for both asset based lending and unsecured business loans, either separately or at the same time.
When assessing an application, lenders look at more than just the security you’re offering. They also consider your existing lending commitments and whether your business can comfortably service all of its debt. If you’re applying for both a secured and an unsecured facility, lenders will assess the combined repayment obligations alongside your cash flow, trading performance, and overall financial position.
Having one loan does not automatically prevent you from obtaining another. What matters is demonstrating that your business can support both facilities without placing unnecessary pressure on cash flow.
Get Tailored Advice from Dark Horse Financial
Every business has different funding requirements. The right solution depends on factors such as:
- How much you need to borrow.
- How quickly you need the funds.
- Whether you own suitable assets.
- Your cash flow and financial position.
- Your long term business objectives.
At Dark Horse Financial, we compare lenders across both secured and unsecured business finance to help you find a solution that matches your circumstances.
Whether you’re purchasing equipment, expanding your operations, refinancing existing debt, or simply improving cash flow, we’ll help you understand your options and guide you through the application process from start to finish.
Frequently Asked Questions
Usually, yes. Because unsecured loans do not require security valuations or documentation relating to assets, approvals are often much faster. Many lenders can approve suitable applications within one to two business days, while secured loans may take longer depending on the type of security being assessed.
Secured business loans can start at 6% to 8% p.a., while unsecured loan rates start at 8% for very strong bank applicants and around 14% from non bank lenders. The exact interest rate depends on factors such as your business’s financial position, credit profile, loan amount, repayment term, and the lender’s policy.
Yes. Many businesses begin with unsecured finance to access funds quickly. As the business grows and acquires valuable assets or builds equity in property, refinancing into a secured facility may provide access to lower interest rates, larger borrowing limits, or longer repayment terms.
It is still possible to qualify for business finance without using assets as security. Many lenders offer unsecured business loans based on your business’s revenue, cash flow, trading history, and overall ability to service the loan. The amount you can borrow will depend on your financial profile rather than available security.
Not necessarily. Rather than risk, there are some trade offs to consider. Unsecured loans generally have higher interest rates and shorter repayment terms, which can increase regular repayments. Before accepting any facility, it’s important to ensure the repayments fit comfortably within your business’s cash flow.
Neither loan type is automatically easier to qualify for because lenders assess different types of risk.
For an unsecured business loan, lenders assess your business’s cash flow, trading history, credit profile, and ability to service the repayments.
For asset based lending, the quality and value of the security become an important part of the assessment alongside your ability to repay the loan. Businesses with valuable assets may qualify for larger loan amounts or more favourable terms than they could access through unsecured lending.
If you’re unsure which option you’re more likely to qualify for, Dark Horse Financial can compare lenders with different policies and help identify the finance solution that best suits your business.
In Conclusion
The choice between asset based lending and unsecured business loans comes down to how your business operates, what you’re borrowing for, and how you want to balance cost, flexibility, and borrowing capacity.
Asset based lending is often the stronger option for businesses seeking larger loan amounts, lower interest rates, or longer repayment terms, particularly when valuable assets are available as security. Unsecured business loans, on the other hand, suit businesses that need fast funding, want to avoid using security, or require a simpler application process.
Many businesses benefit from using both throughout their growth, selecting each facility for the purpose it is designed to support rather than relying on a single source of finance.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Speak With a Business Finance Specialist
Finding the right finance solution starts with understanding all of your options.
The team at Dark Horse Financial can help you compare lenders and identify the funding solution that best supports your business goals.
Contact Dark Horse Financial today to discuss your borrowing needs and receive tailored advice.
