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Unsecured
Also called unsecured loan, no collateral, unsecured financing.
Credit extended without a security interest in specific collateral, leaving the creditor with a claim against the business generally rather than a direct right to any particular asset.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Without collateral the creditor's remedy on default is to sue, obtain a judgment, and enforce it — levying on bank accounts, garnishing receivables, or seizing property through the court's process. That is slower, more expensive and less certain than repossessing an asset it already has a lien on, which is why unsecured credit is priced higher and offered at lower amounts.
Business credit cards are the clearest genuinely unsecured product. Some bank lines to strong borrowers are unsecured. Certain online term loans are marketed as unsecured.
The honest position on the fast end of the market is that very little of it is unsecured in a meaningful sense. Most advances and short-term loans marketed as "no collateral required" take a blanket UCC-1 over all business assets and a personal guarantee from the owner. Neither requires the borrower to pledge a specific item, which is what allows the marketing claim, but the creditor ends up with a perfected security interest in everything the business owns and a direct claim against the owner personally.
Where this one catches people
"Unsecured" is read as "nothing of mine is at risk", and it means neither of the things owners think. It does not mean no personal guarantee — a guarantee is a separate promise, and it is standard. It does not mean no UCC filing, because a blanket filing over all assets is compatible with the marketing term as it is used here. The two questions worth asking are: is there a personal guarantee, and will a UCC-1 be filed. The answer to both is usually yes.
Where you will meet this term
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Unsecured — common questions
What does unsecured mean?
Credit extended without a security interest in specific collateral, leaving the creditor with a claim against the business generally rather than a direct right to any particular asset.
Where does unsecured catch people out?
"Unsecured" is read as "nothing of mine is at risk", and it means neither of the things owners think. It does not mean no personal guarantee — a guarantee is a separate promise, and it is standard. It does not mean no UCC filing, because a blanket filing over all assets is compatible with the marketing term as it is used here. The two questions worth asking are: is there a personal guarantee, and will a UCC-1 be filed. The answer to both is usually yes.
Is unsecured the same as an interest rate?
Unsecured is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does unsecured apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit.
Is there a worked example of unsecured?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside unsecured?
Blanket lien, Personal guarantee, Secured loan, UCC-1 financing statement, Writ of execution.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.