Unsecured Business Loans Explained
How do unsecured business loans work?
When applying for an unsecured business loan, lenders assess factors such as your credit score, revenue history, profitability, and cash flow. The loan amount and interest rates are determined based on these evaluations. Once approved, the funds can be used for various business purposes, such as inventory purchase, equipment upgrades, marketing campaigns, or working capital.
Repayment terms for unsecured business loans typically involve regular instalments over a predetermined period, often ranging from months to several years. It’s essential to review the loan terms and ensure that the repayment schedule aligns with your business’s cash flow capabilities.
Your Prospa Business Lending Solutions in a snapshot

Prospa Small Business Loan
- Borrow from $5K up to $150K as a lump sum over a fixed term of up to 36 months.
- Minimum $6K monthly turnover and minimum trading history periods apply.
- Great for managing cash flow, buying stock and equipment, or covering unexpected expenses.

Prospa Business Loan Plus
- Borrow from $150K up to $500K as a lump sum over a fixed term of up to 36 months.
- Minimum $1 million annual turnover and 3 years trading to apply.
- Often used for funding growth, renovations and refits, or equipment purchases.

Prospa Business Line of Credit
- Get ongoing access to funds up to $150K and only pay interest on the funds you use.
- Minimum $6K monthly turnover and minimum trading history to apply.
- Ideal for managing cashflow and unexpected expenses.
How do unsecured business loans work?
Unsecured business loans provide access to funds without requiring collateral or asset security. Unlike secured loans, which are backed by tangible assets, unsecured loans are granted based on the borrower’s creditworthiness, business performance, and financial health.
When applying for an unsecured business loan, lenders assess factors such as your credit score, revenue history, profitability, and cash flow. The loan amount and interest rates are determined based on these evaluations. Once approved, the funds can be used for various business purposes, such as inventory purchase, equipment upgrades, marketing campaigns, or working capital.
Repayment terms for unsecured business loans typically involve regular instalments over a predetermined period, often ranging from months to several years. It’s essential to review the loan terms and ensure that the repayment schedule aligns with your business’s cash flow capabilities.
What does 'No Asset Security' mean for business loans?
The phrase ‘no asset security’ refers to the absence of collateral or tangible assets required to secure a business loan. When Prospa provides a small business with funding we take a personal guarantee from directors, shareholders or persons actively engaged in the management of the business, such as the business owner.
There are two circumstances under which we may also take security in the form of a charge over assets. That is, if the client’s total combined exposure to Prospa funding is (or becomes) greater than $150,000, and/or if a client defaults on their contractual obligations.
The charge over assets allows us to register the security interest on the Personal Property Securities Register (PPSR), or we may register a caveat. If the customer’s combined exposure to our products is over $150,000 we will usually only register on the PPSR (unless the customer later goes into default). If a customer defaults under their loan, we may register on the PPSR and/or register a caveat.
What are the interest rates on unsecured business loans?
Interest rates on unsecured business loans can vary based on several factors, including your creditworthiness, the lender’s assessment, the loan amount, and the repayment term. As there is no collateral to mitigate the lender’s risk, interest rates on unsecured loans are typically higher than those on secured loans.
It’s important to research and compare interest rates from different lenders to secure the most favourable terms for your business. Some lenders may offer fixed interest rates, ensuring consistent monthly payments, while others may offer variable rates that fluctuate with market conditions. Consider your business’s financial situation, risk tolerance, and repayment preferences when selecting the loan option with the most suitable interest rate structure.
What can be used as security for a business loan?
When applying for a traditional secured business loan, lenders typically require collateral to secure the loan amount.
Acceptable forms of collateral can include:
- Real Estate: Property such as land, buildings, or commercial spaces can be used as collateral.
- Vehicles and Equipment: Lenders may accept valuable machinery, vehicles, or equipment as collateral.
- Inventory: Certain lenders may consider inventory as collateral, especially in industries where inventory value is high.
- Accounts Receivable: Unpaid customer invoices or accounts receivable can be used as collateral in some cases.
- Cash and Savings: In certain instances, lenders may allow cash deposits or savings accounts to secure the loan.
At Prospa, if a customer borrows more than $150K, we require upfront asset security in the form of a charge over the applying business entity (or entities) which will be registered on the Personal Property Securities Registry (PPSR).
It’s important to note that the specific collateral requirements can vary between lenders. Always consult with your chosen lender to determine their acceptable forms of collateral.
What type of collateral cannot be used as security for a business loan?
While various assets can be used as collateral, certain types of collateral are generally not accepted by lenders:
- Personal Assets: Typically, lenders require business-related collateral rather than personal assets, such as a personal residence or personal savings.
- Intangible Assets: Assets such as intellectual property, trademarks, patents, or copyrights are generally not accepted as collateral.
- Future Revenue: Lenders usually do not consider projected future revenue as collateral since it is uncertain and not immediately accessible.
- Uninsurable Assets: Assets that cannot be insured or have uncertain value are less likely to be accepted as collateral.
It’s crucial to review the specific collateral requirements of lenders before applying for a business loan to ensure your assets align with their criteria.