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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Unsecured lending

When will a bank lend to a business unsecured?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

An unsecured loan is one where the lender holds no charge over the borrower's assets and relies instead on its cash flow, its balance sheet and its covenants, usually including a negative pledge. It is common in corporate lending to large, rated or listed companies and rare for owner-managed businesses, where security and the owner's guarantee carry much of the second way out. An unsecured lender ranks behind every secured creditor in a failure, and the margin is priced for that.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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