Whether financing is secured or unsecured comes down to one question: is specific collateral pledged against it?
Secured financing
Secured financing is backed by an asset such as equipment, real estate, receivables, or other business property. Because the lender has recourse to that asset, secured structures can sometimes open terms that unsecured financing may not.
Unsecured financing
Unsecured financing is not tied to a specific pledged asset and instead leans more heavily on business and owner profile. It can be simpler, but underwriting typically weighs other factors more.
Which is better?
Neither is universally better. The right choice depends on what assets you have, what you are financing, and the structure you are comfortable with. An underwriter can help weigh the trade-offs for your situation.
The practical difference
| Secured | Unsecured | |
|---|---|---|
| Backed by | A specific pledged asset | Cash flow and operating history |
| Underwriting weight | Collateral value and lien position | Revenue consistency, obligations |
| Typical amounts | Often larger, tied to asset value | Tied to cash-flow capacity |
| Documentation | Asset schedules, valuations, lien search | Bank statements, financials |
| Risk to borrower | The pledged asset is at stake | No specific asset pledged |
Lien position matters
(Asset value × Advance rate) − Existing liens- Confirm what liens are already recorded
- Understand which position the new financing takes
- Know how the asset is valued and how often it is re-checked
- Consider whether the asset is core to operations
Related financing
Have a question about your situation?
Start a financing request and our underwriting team will follow up.