Mr's short answer
Borrow secured when you need a larger amount, have weaker credit or a short trading history, and own property with equity. Borrow unsecured when you're trading steadily, need a smaller sum, typically $5,000 to $500,000, and would rather not put a property on the line. Many New Zealand owners have a choice; the right route depends on amount, timing, cost and risk.
Key points
- Secured means a property (or other asset) backs the loan; unsecured relies on your trading.
- Secured business loans range from $20,000 to $5,000,000; unsecured options typically $5,000 to $500,000.
- Unsecured loans usually still need a personal guarantee from directors.
- Weak credit or IRD debt often points towards secured options.
Mr hears this question most often from owners who’ve just been told “no” by a bank and suddenly find themselves weighing up words they’ve never had to think about. The difference is simpler than it sounds: a secured loan is backed by an asset the lender can rely on if things go wrong; an unsecured loan is backed by your business’s ability to keep trading and paying.
What does “secured” actually mean for a business loan?
A secured business loan is registered against an asset — in this site’s world, that’s almost always property. The lender registers a mortgage (first or second) or a caveat-style interest on the title. If the loan isn’t repaid as agreed, the lender has a legal route to recover what’s owed from that property.
Property-secured business lending runs from $20,000 to $5,000,000, and it can be on residential or commercial property. Because the lender’s risk is anchored to the property, it can often say yes when trading history is short, credit has a few marks, or there’s tax owing.
What does “unsecured” mean?
An unsecured business loan isn’t registered against a property. It’s sized on your turnover and bank statements, typically between $5,000 and $500,000, and it suits businesses that have been trading a while and have steady money moving through the account.
“Unsecured” doesn’t mean no strings. Expect:
- a personal guarantee from directors or owners (see will I have to sign a personal guarantee?);
- possibly a general security agreement over business assets, registered on the Personal Property Securities Register;
- shorter terms and more frequent repayments, often weekly or fortnightly.
Side by side
| Secured (property) | Unsecured (cash flow) | |
|---|---|---|
| Typical amount | $20k – $5m | Typically $5k – $500k |
| What’s assessed most | Equity, valuation, exit plan | Turnover, bank statements, trading history |
| Credit history | Matters, but property can offset it | Matters more |
| Paperwork | Title, valuation, ID, purpose | Bank statements, ID, business details |
| Risk to you | Property is at stake if things go wrong | Personal guarantee and business assets |
| Typical term | Short to medium, with a clear exit | Shorter, regular repayments |
Which one suits my situation?
Mr’s rule of thumb, which a specialist will refine for your case:
Lean towards secured if:
- you need more than unsecured lending would stretch to;
- your business is new, or your financials are behind;
- there’s IRD debt or a credit default in the background;
- you have a clear exit, such as a refinance once your accounts are filed.
Lean towards unsecured if:
- you’ve been trading steadily for a while and the bank statements show it;
- the amount is modest relative to turnover;
- you don’t want a property tied up, or nobody in the business owns one;
- the need is short and specific — stock for a busy season, a gap until a big invoice is paid.
If you’re torn, the funding readiness check will point you at the likelier route based on your answers. Or skip straight to a person and tell us what you need.
What about the risk to my home?
This is the bit worth slowing down for. Securing a business loan against the family home means the home stands behind the business debt. That can be exactly the right call — plenty of New Zealand businesses were started or rescued that way — but go in with eyes open:
- Talk to everyone on the title. If your partner or a family trust owns part of the property, they’ll need to agree and usually get independent legal advice.
- Have an exit you believe in. Short-term secured loans work best when you know how they’ll be repaid.
- Borrow what you need, not what’s available. Equity is tempting; repayments are real.
Our page on borrowing against your house for your business covers this in more depth.
Can I use both?
Yes, and some owners do. A property-secured loan might fund a larger one-off need — buying out a partner, clearing an IRD debt — while a smaller unsecured facility smooths day-to-day cash flow. The trick is making sure the combined repayments fit, which is a conversation worth having before you sign anything.
An illustrative example: same need, two routes
Here’s a made-up example to show how the choice plays out.
A plumbing business in Palmerston North needs $60,000: a new van and enough to carry wages while two large commercial jobs are invoiced. The owners have been trading for four years, deposits are steady, and they own their home with good equity.
- Unsecured route. A lender looks at four years of steady trading and recent bank statements and offers an amount sized on turnover, with weekly repayments over a shorter term. No property is involved, but both owners sign personal guarantees. Paperwork is light and the answer comes quickly.
- Secured route. A lender takes a second mortgage over the home. The amount could be larger, the term longer and the repayments gentler each week, but there’s a valuation, legal work and the family home stands behind the loan.
Neither is wrong. If the commercial jobs will pay within a few months, the unsecured option may be cleaner — the loan clears as the invoices are paid. If the business wants to fund the van over its working life and keep weekly repayments low, the secured route might fit better. The owners’ appetite for putting the house on the line matters too.
Questions to ask yourself before choosing
- How much do I really need, and could unsecured lending stretch that far?
- How quickly do I need it, and how much paperwork can I gather in that time?
- Can my quietest month carry a shorter, unsecured repayment schedule?
- Am I comfortable with my home, or another property, standing behind this debt?
- What’s my exit — trading, refinance, a sale, or a contract payment?
Write your answers down. They’re exactly what a specialist will ask, and having them ready shortens the conversation.
Not sure which way to go?
You don’t have to work it out alone. Tell us the amount, the purpose and whether you own property, and a real person will explain which route fits and why. Asking costs nothing and doesn’t involve a credit check, and we don’t scatter your details across a list of lenders.
Please fill in the form carefully — your answers on property, trading time and any tax owing steer us to the right option first time. Ask Mr which route suits you.
Frequently asked questions
Is an unsecured business loan really unsecured?
Usually no property is mortgaged, but most lenders ask directors or owners for a personal guarantee, and some take a general security agreement over business assets. So it's unsecured against your house, not free of any personal commitment.
Which is cheaper, secured or unsecured?
As a broad rule, security lowers a lender's risk, which tends to help pricing and loan size. But every loan is priced on its own circumstances, including credit history, term and purpose, so we don't publish rates. We explain the full cost before you commit.
Can I start unsecured and switch to secured later?
Yes. Some owners use an unsecured facility to bridge a short gap and later consolidate into a property-secured loan, or the other way around once the business has a longer record. It's worth talking about the likely path at the start.
My credit isn't great. Does that rule out unsecured?
Not always, but it narrows the field. Property security gives a lender something solid to rely on, so past credit problems tend to matter less on a secured loan. Each case is looked at on its merits.
Do I need to own a house to get a secured business loan?
You need some property with equity — a home, rental, section or commercial building. It doesn't have to be your own home, and it can sometimes be owned by a trust or a related party if they agree to provide security.