When a lender describes finance as secured, it means the loan is backed by collateral — a charge over company property, equipment, debtors, or sometimes a director's personal assets. Unsecured lending is extended on the strength of the company's financial profile alone, with no asset pledged as security. Credicorp's products are unsecured business finance: no charge over company assets, and no director personal guarantee.
What security actually means in practice
Security gives a lender a route to recover funds if the company cannot repay — they can appoint a receiver over the charged asset or enforce a personal guarantee against a director personally. For the borrowing company this means the asset cannot be freely sold or encumbered during the loan term, and a personal guarantee exposes a director's private wealth. Both are significant commitments that many company directors are understandably reluctant to give.
Why unsecured finance often costs more
Without collateral, the lender bears more risk. That risk is priced into the cost of credit — unsecured facilities typically carry a higher fee or rate than an equivalent secured facility from the same lender. The premium is the price of keeping company assets free and directors personally unexposed. Whether that premium is worth paying depends on the value of the assets at stake and the company's appetite for encumbering them.
When each makes sense
Secured finance is often appropriate for large, long-duration facilities where the asset being financed is itself collateral — commercial mortgages and asset finance being the clearest examples. Unsecured short-term finance is better suited to working-capital needs, where the amount is moderate, the term is short, and the company wants to preserve its asset position and credit headroom for future secured borrowing.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: Credicorp vs peer-to-peer lending, Credicorp vs a government-backed loan