Secured vs. Unsecured Business Loans in Canada

When Canadian business owners look for financing, one of the first questions they face is: Should I apply for a secured or unsecured loan? The answer can significantly affect your approval chances, interest rate, and repayment terms.

In this guide, we’ll compare secured vs. unsecured business loans, highlight their pros and cons, and help you determine which is best suited for your company’s current stage, assets, and goals.

Whether you’re buying equipment, managing cash flow, or expanding operations, understanding this distinction is critical to making a confident financing decision.

What Is a Secured Business Loan?

A secured loan is backed by business assets, such as trucks, heavy equipment, real estate, or inventory. If the borrower defaults, the lender can seize the collateral to recover the debt.

Common Use Cases:

• Truck or equipment financing
• Commercial property expansion
• Refinancing through sales-leaseback options

Who It’s Best For:

• Asset-heavy businesses (e.g., construction, transportation)
• Companies with fair to poor credit
• Entrepreneurs needing larger loan amounts

Related: Financing & Leasing Options for Equipment and Trucks
Related: Refinancing & Sales-Leaseback Options

What Is an Unsecured Business Loan?

An unsecured loan does not require specific collateral. Instead, lenders assess the borrower’s credit score, business cash flow, and financial history. Approval hinges on your demonstrated ability to repay.

Common Use Cases:

• Working capital injections
• Emergency cash flow solutions
• Launching marketing campaigns or seasonal hiring

Who It’s Best For:

• Strong, established businesses with consistent revenue
• Startups with solid personal credit or co-signers
• Owners who prefer not to risk company assets

Related: Business Line of Credit in Canada
Related: Working Capital Loans for Trucking Businesses

Key Pros and Cons

Secured Loans

Pros:

• Higher approval rates
• Better interest rates
• Larger loan limits

Cons:

• Asset risk if default occurs
• More paperwork and valuation steps
• Slower funding timeline

Unsecured Loans

Pros:

• Quick access to cash
• No risk to assets
• Simple application

Cons:

• Higher rates
• Lower loan ceilings
• Personal guarantees often required

When to Choose a Secured vs. Unsecured Loan

Choose a Secured Loan if:

• You have valuable business equipment or real estate
• You want the lowest possible interest rate
• Your credit score or cash flow needs a boost for approval

Choose an Unsecured Loan if:

• You need fast access to funding
• You don’t want to risk your business assets
• You have strong credit and stable revenue

Not sure which loan fits best? Mehmi Financial Group specializes in tailored solutions across Canada for both types.

Real Example: Truck Financing in Ontario

Let’s say you're a trucking company in Brampton looking to purchase a $150,000 Class 8 truck. You could:

• Secure a truck loan using the vehicle as collateral and pay lower interest with longer terms.
• Opt for an unsecured working capital loan if your truck is coming from a private sale and you want speed—but pay a higher rate and need a stronger business profile.

Read more: Understanding the Basics of Truck Loans

Which Loan Is Easier to Get in Canada?

In general:

• Secured loans are easier to get approved for if you have collateral.
• Unsecured loans require stronger credit and financials.

However, alternative lenders—like Mehmi Group’s network of 30+ lending partners—often have flexible criteria. Some lenders may approve hybrid structures like cash flow + partial collateral-based loans, helping you qualify even with moderate credit.

You could receive up to $5M in 48 hours.

Frequently Asked Questions

What credit score do I need for a business loan in Canada?

A score of 650+ improves your approval chances, especially for unsecured loans. Lower scores may still qualify for secured financing.

Can I get an unsecured business loan with bad credit?

Possibly, but you'll likely need a co-signer, personal guarantee, or proof of strong revenue.

What assets can I use for a secured loan?

Common options include commercial trucks, equipment, real estate, and inventory.

Which is cheaper: secured or unsecured business loans?

Secured loans are typically cheaper due to the lower risk for lenders.

Will I need to give a personal guarantee?

Unsecured loans often require personal guarantees. Secured loans may not, depending on structure.

Ready to Get Funded?

Whether you’re looking to leverage your business assets or apply without collateral, Mehmi Financial Group can help you compare your options.

Fast approvals with minimal paperwork
Up to $5M funded in 48 hours
Tailored terms across 30+ lenders

Speak to a financing advisor today or calculate your monthly payments now

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