“Secured or unsecured?” is usually the first fork in the road for a business loan. The choice shapes almost everything else: how much you can borrow, how fast, what documents you need, who needs to sign and what’s at risk.
What is a secured business loan?
A secured loan is backed by an asset the lender can rely on if the loan isn’t repaid. In business lending, the strongest security is property — a registered mortgage over land and buildings. In New Zealand, that means a first or second mortgage over a home, rental or investment property, commercial property or land that the borrower or a supporting party already owns.
Because the property carries much of the risk, the lender’s main questions are:
- What’s the property worth?
- What’s already owing on it?
- How much equity is available?
- What’s the money for, and how will it be repaid?
Property-secured business loans typically range from $20,000 to $1m. No financials or tax returns are needed for the initial assessment. Bad credit, defaults and arrears are considered case by case, and IRD debt can be refinanced or paid out as part of the loan.
Other forms of security exist — a vehicle, equipment, or a general security agreement over business assets — but none gives a lender the same comfort as a registered mortgage over property.
What is an unsecured business loan?
An unsecured business loan isn’t backed by a mortgage over property. The lender relies on the business’s ability to repay, evidenced mainly by:
- Turnover — what comes into the business bank account each month.
- Bank statement conduct — dishonours, overdrawn days, existing loan repayments.
- Trading history — usually 6+ months.
- Credit history — weaker credit is considered by some lenders.
Unsecured options include term loans (a lump sum repaid over time) and lines of credit (a limit you draw and repay). Decisions are sometimes made the same day.
“Unsecured” doesn’t mean no one is responsible. Lenders commonly ask directors or owners for personal guarantees, and some register a general security interest over business assets on the PPSR.
Side by side
| Property-secured | Unsecured | |
|---|---|---|
| What the lender relies on | Equity in NZ property | Turnover and bank statements |
| Typical amounts | $20,000 to $1m | Sized to turnover |
| Trading history | Considered case by case | Usually 6+ months |
| Financials needed to start | No | Usually bank statements only |
| Credit issues | Considered case by case | Weaker credit considered by some lenders |
| Speed | In some cases funded within 24 hours of approval | Decisions sometimes same day |
| Who signs | Borrower, all property owners, usually guarantors | Borrower, usually guarantors |
| What’s at risk | The property, plus any guarantees | Guarantors’ personal assets; business assets if a GSA is registered |
| Pricing | Every loan priced on the individual situation | Every loan priced on the individual situation |
When does secured make more sense?
- You need a larger amount than your turnover alone would support.
- The business is young, or its financials are behind or show a loss.
- Your credit file has defaults or arrears.
- You need to pay out IRD debt or consolidate several creditors.
- You’re funding something lenders won’t take as security — goodwill when buying a business, or a fit-out.
When does unsecured make more sense?
- The amount is modest relative to turnover.
- You don’t own property, or you’d rather not use it.
- The need is short-term or recurring — a line of credit for timing gaps.
- Speed matters more than size.
What about risk?
With a secured loan, the property is at risk if the loan isn’t repaid. That makes the repayment plan the most important part of the conversation. With an unsecured loan, the risk sits with whoever has guaranteed it — often the directors personally — and with business assets if a general security interest is registered. Neither is “risk-free”. The question is which risk is right for the purpose.
Does security affect the price?
Every loan is priced on the individual situation, and security is one of the biggest inputs, alongside the amount, purpose, credit history and trading pattern. In broad terms, stronger security gives lenders more comfort. We compare across our lending partners to find the sharpest option available for your circumstances, secured or unsecured, and explain the total cost of each.
Can you combine them?
Yes, and it’s common. A property-secured loan might fund the big, longer-term item — buying a business, clearing tax arrears, a fit-out — while an unsecured line of credit handles day-to-day timing. Structured well, each does the job it’s best at.
Not sure which fits?
That’s what the first call is for. Tell a specialist what you need, what the business turns over and whether property is available, and they’ll tell you which route is realistic. Ring the Hotline, or request a call back.
Ready when you are. Ring 09 875 4577 or request a call back — a lending specialist will talk it through.