A row of unoccupied training machines under high ceilings

Revolving facility

Nothing behind it but the trading , and priced accordingly.

An unsecured limit gives a business access to a revolving facility without putting assets behind it. The price of that is a smaller limit, a higher rate, and a personal guarantee in most cases.

Last reviewed 8 September 2026

Indicative interest cost

Weekly

Disclaimer

$147/week

$638 /month $7,650 a year while drawn

Facility limit $100,000

$5,000 $500,000

Average drawn balance $45,000

Nothing drawn Fully drawn

Indicative rate 17.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

The short version

Five lines about what unsecured means here.

Unsecured rarely means nothing is signed. A general security agreement or a personal guarantee is common on facilities marketed as unsecured, and the two are different things.
The rate reflects the missing fallback. It is structural rather than a judgement about the business, and every unsecured lender prices above a secured one for the same borrower.
The limit is sized on trading alone. Bank statements carry the whole file, particularly the low points rather than the averages.
Reviews are ordinarily more frequent. A lender with no security watches the position more closely, and the limit moves more readily in both directions.
Indicative only. Every figure here is illustrative. Actual limits, rates and requirements come from the lender after assessment.

The word itself

What unsecured actually excludes.

In New Zealand practice, unsecured ordinarily means no property security and no specific asset security. It does not usually mean nothing at all. A general security agreement over the business is frequently taken even on facilities described as unsecured, which is a real security interest registered on the Personal Property Securities Register.

A personal guarantee is separate again, and it is required in the large majority of unsecured business facilities. It is not security over an asset; it is an undertaking by a person to meet the obligation if the company does not, which reaches whatever that person owns.

So the useful question is not whether a facility is unsecured but what specifically is being signed. Asking directly whether a general security agreement is required, and whether a guarantee is required, produces two clear answers, and neither of them is implied by the word on the proposal.

Against a secured limit

What the difference looks like across the whole facility.

Indicative directions rather than any lender’s pricing. The rate row gets the attention and the others matter as much in practice.

Feature	Unsecured line	Secured line
Rate	Higher	Lower
Limit	Smaller	Larger
Speed to arrange	Faster	Slower, valuation and legals
Review frequency	More frequent	Less frequent
Assets exposed	Business assets under a GSA	Business assets and property
Personal guarantee	Usually	Frequently
Effect on later financing	A GSA still complicates it	A GSA and a mortgage complicate it more

The speed row is the reason an unsecured facility is sometimes the right answer even where security exists. A limit needed this month cannot wait for a valuation, and the premium for six weeks of certainty is frequently worth paying.

Worked example

A $100,000 unsecured limit across a year.

A consultancy holds a $100,000 unsecured line at an indicative 17%, with a 0.75% line fee on the limit. Its drawn balance moves between nothing and $80,000 depending on when milestone invoices are paid, averaging around $45,000.

Interest for the year is roughly $7,650 and the line fee is $750, so the facility costs in the order of $8,400. On a secured equivalent at 10%, the same average drawn balance would cost about $4,500 in interest.

The $3,900 difference is what the business is paying to keep its property out of the arrangement and to have the facility in place quickly. Framed that way it is a decision rather than a penalty, and for a business with a home behind the only available security it is frequently a decision worth making.

Illustrative figures

Limit: $100,000
Average drawn: ~$45,000
Indicative rate: 17%
Interest a year: ~$7,650
Line fee at 0.75%: $750
Secured equivalent interest: ~$4,500

Illustrative on stated assumptions and rounded. Not a quote or offer of credit.

How a limit is sized without security

Four things carrying the whole decision.

A general description rather than any lender’s criteria, which are their own and vary considerably.

The low points in the account

Not the average balance but the lowest, and how often it is reached. A lender with no security is asking whether the business can absorb a bad month, and that is where the answer is.

Consistency of income

Whether revenue arrives steadily or in blocks, and how large the gaps are. Lumpy income is not disqualifying and it changes what limit looks safe.

Existing commitments

Total obligations rather than this one alone. On an unsecured file this weighs more heavily, because there is nothing behind any of them.

Trading history

How long, and how consistently. A short history is a real constraint here in a way it is not on a facility secured against a ledger or an asset.

The part described as a formality

A personal guarantee is an obligation, not paperwork.

It reaches whatever the guarantor owns, it survives the company, and what it covers is what the document says rather than what was explained at signing. Guarantees written to cover all present and future obligations do not end when the facility that prompted them is repaid. Independent legal advice is ordinarily required before one is signed, and where it is offered as a formality that is precisely the moment to treat it as anything but. A solicitor reading it takes an hour and ordinarily costs less than anything else in the arrangement.

The trade

What it gives and what it costs.

What it gives

A revolving limit without property behind it
Speed, since no valuation or property legal work is involved
Availability to businesses with no property to offer at all
A facility that can be arranged in a timeframe a secured one cannot
The ability to keep a home entirely out of the business’s finance arrangements

What it costs

A rate several points above a secured equivalent, every year it is drawn
A smaller limit, frequently by a multiple rather than a margin
A personal guarantee in the large majority of cases
More frequent reviews, and a limit that moves more readily
A general security agreement that still complicates later financing

When it goes wrong

Three consequences worth understanding in advance.

The limit is reduced quickly

A lender with no security responds to a weakening position faster than a secured one, because it has less protection and more reason to act early.

What happens:Funding withdrawn at the point it is most needed, on a shorter timeline than a secured facility would apply.

The guarantee is called

A default reaches the guarantor personally for whatever the document covers, which on an all-obligations guarantee is more than the facility that prompted it.

What happens:Personal exposure that was visible in the document and frequently was not read as an obligation at the time.

The rate makes a permanent balance expensive

A facility intended for fluctuation that becomes permanently drawn is carrying long-term debt at unsecured revolving pricing.

What happens:A cost several times what a secured term facility would have carried for the same money.

The third is the most common and the most avoidable. An unsecured revolving limit is expensive money for anything permanent, and a balance that has stopped moving is the signal to look at a different instrument.

The honest position

When paying the premium is the right call.

Where the only available security is a family home, where the expected drawn balance is modest, and where the difference between secured and unsecured pricing is a few thousand dollars a year, paying the premium is frequently the better decision. The saving is bounded and the exposure is not, and a business owner who keeps the house out of the arrangement has bought something real with the difference.

It is also right where speed matters. A secured facility takes as long as a valuation and a set of property legals take, and a limit needed this month cannot wait for that. Taking the unsecured facility now and refinancing to a secured one later is a legitimate sequence rather than a compromise.

Where it is not right is on a large, permanently drawn balance for a business that has commercial security available and no particular reason to withhold it. There the premium is being paid for nothing, year after year, and the arithmetic is not close.

The lender landscape

Who actually writes unsecured revolving credit in New Zealand.

Banks write unsecured business limits, generally at modest sizes and generally to businesses with an established banking relationship. Non-bank lenders write them more readily and at higher prices, which is the trade-off that defines this part of the market.

That produces a practical sequence for a business with no property to offer. The incumbent bank is worth asking first, because a limit from the institution that holds the account is ordinarily cheaper and because the answer costs nothing to obtain. A non-bank lender is the fallback where the bank will not write enough, and the premium is the price of the larger limit rather than of anything else.

What is worth avoiding is applying widely and simultaneously. Credit enquiries are visible, a cluster of them reads as urgency, and on an unsecured file where the trading position carries everything, that signal costs more than it does elsewhere.

Building toward security

An unsecured facility is frequently a stage rather than a destination.

A business that takes an unsecured limit because it has nothing to offer is not in that position permanently. Two or three years of clean conduct on the facility, a stronger balance sheet and possibly a commercial property acquired along the way all change what is available.

The mistake is not revisiting it. Facility pricing set at the point a business was newest and least proven is rarely adjusted without being asked, and a business paying an unsecured premium three years after it stopped being necessary is paying for a position it no longer occupies.

The conversation is straightforward: what has improved, what security could now be offered, and what that would do to the rate and the limit. A lender that values the relationship engages with it, and one that does not has said something useful about whether to look elsewhere.

The cost while drawn

What an unsecured drawn balance costs.

Running the same drawn balance at an unsecured and a secured rate is what turns the security question into a number. Indicative only, and not a quote or offer of credit.

Indicative interest cost

Weekly

Disclaimer

$147/week

$638 /month $7,650 a year while drawn

Facility limit $100,000

$5,000 $500,000

Average drawn balance $45,000

Nothing drawn Fully drawn

Indicative rate 17.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

References

Sources

Personal Property Securities Register
Backs the point that a general security agreement is a registered interest even on a facility described as unsecured.
New Zealand Law Society
Referenced for the point that a personal guarantee is a matter for a solicitor before it is signed.
Commerce Commission
The regulator whose guidance covers lender conduct and guarantor disclosure.
Credit Contracts and Consumer Finance Act 2003
Relevant where a guarantor’s or sole trader’s borrowing is wholly or predominantly for personal use.
Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.

FAQ

Unsecured line of credit in New Zealand, questions answered

What does unsecured actually mean here?

Ordinarily no property security and no specific asset security. It does not usually mean nothing is signed, because a general security agreement over the business and a personal guarantee are both common on facilities marketed as unsecured.

Why is the rate higher?

Because the lender has no fallback beyond the business itself. It is structural rather than a judgement about the applicant, and every unsecured lender prices above a secured one for the same borrower.

Is a personal guarantee required?

In the large majority of unsecured business facilities, yes. It is an obligation reaching whatever the guarantor owns, it can cover more than the facility that prompted it, and independent legal advice is ordinarily required before signing.

How is the limit decided without security?

From the trading position alone, particularly the low points in the account rather than the averages, alongside income consistency, existing commitments and trading history. Bank statements carry the whole file.

How much smaller is an unsecured limit?

Materially smaller, and by how much depends on the lender and the business. The gap is a multiple rather than a margin in many cases, which matters as much as the rate difference does.

Are reviews more frequent?

Ordinarily yes. A lender with no security watches the position more closely and moves the limit more readily in both directions, which is worth knowing before treating an unsecured limit as dependable capital.

Does a general security agreement still apply?

Frequently, even on an unsecured facility. It covers the present and after-acquired property of the business, and it complicates later asset financing in exactly the way a secured facility’s would.

When is unsecured the better choice?

Where the only security available is a family home, where the expected drawn balance is modest, or where speed matters and a valuation cannot wait. In those cases the premium buys something real.

When is it the wrong choice?

On a large, permanently drawn balance where commercial security is available and there is no particular reason to withhold it. There the premium is being paid every year for nothing.

Can an unsecured facility be refinanced to a secured one later?

Frequently, and taking the unsecured facility now and refinancing when there is time is a legitimate sequence. What matters is checking the exit terms of the first facility before assuming the second is straightforward.

Does a short trading history rule it out?

It is a real constraint here, more than on a facility secured against an asset or a ledger, and lenders differ considerably on their minimums. A business declined by one on that basis is not declined by the market.

Is this page financial advice?

No. It describes how a facility works in general terms. This site is not a lender, a broker or a registered financial adviser, and whether an unsecured line suits a particular business depends on facts a website cannot see.