Are loans unsecured or will a personal guarantee or security be required?
The short answer and what “security” really means
In UK business finance, both unsecured and secured options exist, but “unsecured” often still means a personal guarantee may be required. Whether a lender asks for a personal guarantee, a specific asset as security, or a broader charge depends on risk, loan size, and your company’s financial profile. The stronger your trading, cash flow and asset base, the more likely you can minimise or avoid guarantees and security.
Best Business Loans is an introducer that helps established UK companies explore relevant providers rather than offering finance directly. We match your profile to lenders and brokers whose requirements align with your circumstances and sector. Any offer, security, or guarantee requirement will ultimately be set by the finance provider.
What counts as “security” in practice?
Security is anything a lender can rely on to reduce their risk of loss if repayments are missed. It can include property charges, asset-specific liens, debentures, invoice assignments, or a director’s personal guarantee. A personal guarantee is not a charge on a specific asset, but it legally commits the guarantor to repay if the company cannot.
Unsecured vs. secured: the key distinction
An unsecured business loan is not tied to a specific asset, but lenders may still request a personal guarantee and may file a debenture. A secured loan is backed by identified collateral, such as commercial property, vehicles, or machinery. In both cases, affordability and business viability remain central to decisions.
Quick reality check
Lenders make security decisions using a risk-based approach. Smaller, shorter-term facilities for profitable companies may proceed without hard asset security, though a guarantee is often requested. Larger, longer-term or higher-risk facilities commonly require security and multiple guarantees.
When lenders ask for a personal guarantee or security
Most mainstream lenders to limited companies will consider a personal guarantee where the business has limited assets or shorter trading history. Guarantees align incentives by making directors partly responsible if the company defaults. PGs are particularly common on unsecured term loans and revolving credit facilities.
Security is more likely as the loan size rises, the term lengthens, or the sector risk profile increases. Security may also be requested if there are adverse credit events, seasonality, or thin margins. The presence of existing borrowing and priority claims can also tip decisions toward security.
Common triggers for guarantees and security
- Loan size and term: Larger or longer-term funding usually attracts stronger security.
- Trading history: Younger businesses typically face PGs or asset security unless very strong.
- Profitability and cash flow: Consistent profit and debt service coverage may reduce PG intensity.
- Credit profile: Adverse entries for the company or directors can lead to security requests.
- Sector risk: Volatile sectors may see more stringent security or lower loan-to-value ratios.
Types of guarantees and security you may see
- Personal guarantee (PG): A director or shareholder promises to repay if the company cannot.
- Joint and several PGs: Multiple guarantors are each liable for the full outstanding debt.
- Fixed charge: A charge over a specific asset such as property or a vehicle.
- Floating charge/debenture: A comprehensive claim over business assets, often used by banks and ABLs.
- Invoice assignment: Security over receivables within invoice finance arrangements.
What if I cannot give a PG or security?
Some lenders will consider PG waivers where the business has strong trading performance and robust net assets. Others may accept lower limits, tighter covenants, or a shorter term instead. Alternatives like asset finance or invoice finance may reduce the need for personal guarantees.
Typical security expectations by funding type
Different finance products carry different security norms. Knowing these expectations helps you target the most suitable options early. A portfolio approach can also blend unsecured and asset-based facilities to meet specific goals.
Unsecured term loans and revolving credit
Unsecured term loans commonly require a personal guarantee for limited companies, especially for SMEs. Lenders may file a debenture even where no fixed asset is pledged. Credit limits reflect affordability, credit strength, and the number of guarantors willing to support the facility.
Revolving credit facilities, overdrafts, and lines of credit may be offered on a PG-only basis for established firms. Larger limits or higher utilisation usually push lenders toward additional comfort such as a debenture. Covenants around cash flow and liquidity may apply.
Asset finance and vehicle finance
Asset finance is typically secured on the asset being purchased or refinanced. Hire purchase or finance lease agreements use the equipment or vehicles as primary security. Where resale value or depreciation risk is higher, a lender may still request a PG, especially for smaller companies.
Invoice finance and asset-based lending
Invoice finance is secured on the debtor book and often supported by a debenture. Concentration, dispute levels and debtor quality influence limits and advance rates. Many providers may not require a PG for the full facility, although guarantees are still common.
Merchant cash advance and card revenue funding
Merchant cash advances are repaid as a percentage of card takings and are not usually secured against property. A PG may be required depending on risk and trading performance. Providers focus on card revenue consistency and seasonality.
Government-backed schemes
Under the current Growth Guarantee Scheme, participating lenders make their own decisions on security within scheme rules. Personal guarantees may be requested on a case-by-case basis under lender policy. Always check the latest scheme guidance and lender criteria.
How to improve your chances of unsecured funding or PG-light terms
Lenders price and structure deals based on evidence. The clearer your financial picture and the stronger your controls, the more comfortable a provider can be with unsecured or lighter-security terms. Preparation can reduce friction, time to decision and the need for heavy collateral.
Practical steps that can help
- Show robust affordability: Provide up-to-date management accounts, filed accounts, and a sensible cash flow forecast.
- Strengthen your credit profile: Pay suppliers on time, address CCJs, and ensure accurate filings at Companies House.
- Reduce uncertainty: Explain seasonality, supply-chain resilience and debtor quality with clear commentary.
- Right-size the request: Ask for the amount you can service, not the maximum headline figure.
- Provide comfort alternatives: Consider partial PGs, PG caps, or a debenture in place of a fixed charge where acceptable.
Consider product fit
Choose funding that suits the asset or cash flow you are leveraging. Asset finance aligns repayments with the life of equipment, reducing the need for broad security. Invoice finance grows with sales and can reduce reliance on unsecured term debt.
When a PG is requested
Ask about PG caps, carve-outs, or time-bound guarantees where available. Consider personal guarantee insurance to mitigate risk, acknowledging policy exclusions and limits. If you have multiple directors, discuss proportional or joint guarantees with the lender.
If you are exploring working capital for an established SME, see our guide to small business loans. You can also submit a Quick Quote to be matched with providers who may align with your preference on guarantees and security. There is no obligation to proceed with any introduction.
Risks, responsibilities, FAQs and next steps
A personal guarantee creates personal liability and can impact your credit position if called. Secured borrowing can put business or personal assets at risk if repayments are missed. It is vital to consider independent legal and tax advice before entering a guarantee or security agreement.
Clear, fair, and not misleading disclosure
Best Business Loans acts as an independent introducer and does not lend or provide financial advice. Any eligibility, rates, or terms are set solely by the provider, subject to their underwriting, affordability checks and policies. We focus on making your options clearer so you can select a route that fits your cash flow and risk appetite.
Frequently asked questions
Will an “unsecured” loan still require a personal guarantee?
Often yes for limited companies, as the guarantee supports the lender’s risk where no specific asset is charged. Some providers may waive or cap PGs for stronger cases. The final position depends on the lender’s policy and your trading profile.
What security could be required for a larger loan?
Expect a mix of PGs, debentures, and where suitable, fixed charges on property or high-value equipment. Invoice and asset finance rely on receivables and assets respectively. The package is designed to reflect risk, recovery value and affordability.
Can a PG be avoided?
Yes, in some cases where the business has strong financials or offers acceptable alternative security. Asset-backed facilities can reduce reliance on guarantees. Limits and pricing may differ without a PG.
How can I prepare for a smoother process?
Provide recent management accounts, annual accounts, bank statements and a clear use of funds. Highlight cost controls, debtor quality and any secured assets. Be transparent about challenges and how the funds will improve resilience or growth.
Is my home at risk with a PG?
A PG is a personal commitment, and recovery action could affect personal assets if the business defaults. Always review the legal terms and consider independent advice. A fixed legal charge on a personal residence is typically a separate, explicit consent.
Key takeaways
- “Unsecured” business loans may still require a personal guarantee for limited companies.
- Security strength tends to rise with loan size, term length and perceived risk.
- Asset finance and invoice finance use the asset or debtor book as primary security.
- Preparation and strong financial evidence can reduce or reshape security requirements.
- Always read the terms and consider independent advice before signing a PG or security document.
How Best Business Loans can help
Our AI-enabled platform helps you understand which products are likely to suit your risk profile, asset base, and sector. We then introduce you to lenders or brokers who are active in your industry and open to your requirements on guarantees and security. You remain in control of which route, if any, you pursue.
What to expect from our process
- Speed: A short Quick Quote lets us analyse your case and suggest suitable directions.
- Relevance: We focus on providers whose criteria match your company’s profile and purpose.
- Transparency: We do not promise the cheapest rate, but we aim to connect you with credible options.
Next steps and compliance notes
Submit a Quick Quote to get matched with providers who may meet your preferences on security and guarantees. There is no obligation to proceed, and you can compare options calmly before deciding. Always check costs, terms, and risks, and consider independent professional advice where appropriate.
Updated October 2025. Information provided is general in nature and subject to change by finance providers and regulators. Eligibility and approvals are always subject to lender assessment and underwriting.
Summary
In the UK, many SME loans described as “unsecured” still rely on personal guarantees, and larger or riskier facilities usually require stronger security. The best approach is to match the right product to your funding purpose, supply clear financial evidence, and explore asset-based options where they offer better fit. Best Business Loans helps you compare directions and meet providers who understand your sector and requirements.
Ready to explore your options with clarity on guarantees and security? Get your free Quick Quote now and see which routes could work for your business.