Compare finance types
Unsecured business loan vs line of credit: which is right for your business?
The main difference between an unsecured business loan and a line of credit is how funds are delivered: a loan pays a lump sum repaid on a fixed schedule, while a line of credit is an approved limit you draw, repay and redraw, paying interest only on what you use.
Line of credit vs Unsecured loan at a glance
| Business line of credit | Unsecured business loan | |
|---|---|---|
| What it is | A business line of credit is an approved limit you can draw on, repay and redraw as needed, paying interest only on the amount used. It suits businesses whose funding needs rise and fall through the year. | An unsecured business loan is a lump sum repaid over an agreed term without property or equipment pledged as security. Lenders on our panel assess trading history, turnover and cash flow instead, and a director’s guarantee usually applies. |
| Amount | $10,000 – $500,000 | $5,000 – $500,000 |
| Term | 6–24 months | 3–36 months |
| Indicative rate | 11.5% – 24% p.a. | 9.9% – 29.5% p.a. |
| Rate type | Variable | Fixed or variable |
| Security | Unsecured (guarantee may apply) | Unsecured (guarantee may apply) |
| Repayments | Weekly or monthly minimums on the drawn balance | Daily, weekly or monthly |
| Typical speed | 1–3 business days | 24–72 hours after documents are received |
| Best for | Seasonal or project-based businesses managing cash-flow timing | Established businesses needing a set amount fast without pledging an asset |
| Consider the other if | A single large purchase you will repay over years | Long-term purchases of vehicles, machinery or property where secured finance is cheaper |
| Tax | Interest and line fees on business use are generally deductible. | Interest on business-purpose borrowing is generally tax deductible. Confirm with your accountant. |
| How funds arrive | One lump sum | Draw as needed up to a limit |
| Interest charged on | Full balance from day one | Drawn balance only |
| Reuse after repaying | No — reapply | Yes — redraw |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a business line of credit
A business line of credit is usually the better fit for seasonal or project-based businesses managing cash-flow timing. Its main advantages are pay interest only on what you draw, redraw without reapplying, buffer against slow-paying customers. Consider the alternative if a single large purchase you will repay over years.
When to choose a unsecured business loan
A unsecured business loan is usually the better fit for established businesses needing a set amount fast without pledging an asset. Its main advantages are no property or equipment pledged, fast decisions once documents are in, flexible use of funds. Consider the alternative if long-term purchases of vehicles, machinery or property where secured finance is cheaper.
Our verdict
Choose an unsecured loan for a one-off, known amount such as a fit-out or tax bill. Choose a line of credit when cash-flow gaps come and go and you want funds on standby without paying interest on idle money.
Many businesses end up with both: a term loan for a specific purchase and a smaller line of credit as a buffer. Your broker checks that the combined repayments still fit your cash flow.
Business line of credit
A business line of credit is an approved limit you can draw on, repay and redraw as needed, paying interest only on the amount used. It suits businesses whose funding needs rise and fall through the year.
Unsecured business loan
An unsecured business loan is a lump sum repaid over an agreed term without property or equipment pledged as security. Lenders on our panel assess trading history, turnover and cash flow instead, and a director’s guarantee usually applies.