01
What is the annual difference, really
Calculated on the expected average drawn balance rather than on the limit. That figure is what security is worth, and it is frequently smaller than the rate gap suggests on a lightly used facility.
Guide
What the security buys, and what it costs.
Security lowers the rate and raises the limit, both by more than is commonly expected. It also exposes assets to a limit that never amortises, which is a different proposition from securing a term loan.
MS
Matt Stiles Editor
Published 8 September 2026 Last reviewed 8 September 2026 Read time 12 min
The short version
Five lines that frame the decision.
- Security moves the rate and the limit. Both materially, and the limit difference is frequently the more important of the two.
- The exposure is to the limit. A revolving facility has no amortisation, so the security stands behind the full limit for the life of the arrangement.
- A general security agreement is broader than it sounds. Present and after-acquired property of the business, which complicates every later financing.
- A home is a different category of decision. It reaches people who are not party to the business, and it deserves a solicitor and a conversation.
- Indicative only. This is general information rather than advice, and every figure is illustrative.
What each position produces
The same business, five security positions.
Indicative directions rather than any lender’s pricing. The ordering and the size of the steps are the reliable part.
| Security | Limit | Rate | Exposed |
|---|---|---|---|
| Nothing but trading | Smallest | Highest | The business |
| A general security agreement | Larger | Lower | Business assets |
| GSA plus a personal guarantee | Larger again | Lower again | The guarantor personally |
| Commercial property | Substantially larger | Substantially lower | The property |
| Residential property | Largest | Lowest | The home |
Indicative of direction rather than a schedule. Any particular facility is priced by its lender after assessment.
Worked example
What the security is worth, over five years.
A business is offered a $90,000 unsecured limit at an indicative 17%, or a $200,000 limit at an indicative 10% secured over commercial property. Its expected average drawn balance is $90,000 either way.
Unsecured, interest is roughly $15,300 a year. Secured, it is roughly $9,000. The difference is $6,300 a year, which across five years is about $31,500 before any consideration of the additional headroom.
That is a substantial and entirely real saving, and it is the reason security is worth taking seriously rather than dismissing. What it does not settle is whether the asset behind it should be exposed to a $200,000 limit for five years, which is the other half of the question and the half that is not a number.
Illustrative figures
- Unsecured limit
- $90,000 at 17%
- Secured limit
- $200,000 at 10%
- Average drawn
- $90,000
- Unsecured interest a year
- ~$15,300
- Secured interest a year
- ~$9,000
- Five-year difference
- ~$31,500
Illustrative on stated assumptions and rounded. Not a quote or offer of credit.
The difference from a term loan
A revolving limit does not amortise, so the exposure never falls.
Security behind a term loan is exposed to a balance that reduces every month, so the risk shrinks over the life of the facility. Security behind a revolving limit is exposed to the limit on any day, for as long as the facility exists, because the balance can be at the limit tomorrow regardless of what it has averaged. That is a materially different commitment for the same headline amount, and it is the reason securing a revolving facility deserves more thought than securing a loan of the same size.
The general security agreement
The security commonly granted without examination.
A general security agreement takes security over the present and after-acquired property of the business and is registered on the Personal Property Securities Register. It covers everything the business owns now and everything it acquires later, it is not limited to a named asset, and it does not shrink as a facility is repaid.
The consequence appears at the next financing. A financier funding a machine wants a first-ranking position over that machine, and where a general security already exists, that requires an arrangement with the incumbent lender. It is routine and it takes time, and it is discovered late far more often than it is planned for.
Asking at the outset whether the lender will release specific assets on request, and what that process involves, is a fair question with a straightforward answer. It costs nothing to ask and it avoids a problem two years later that will feel unfair and will have been disclosed all along.
Deciding
Four questions that settle it.
02
What exactly is being secured
A general security agreement, a specific asset, commercial property or a home are four very different answers, and the word secured covers all of them.
03
How long will the facility exist
Exposure to a limit for two years is a different proposition from exposure for ten, and revolving facilities tend to persist longer than businesses expect.
04
Who else is affected
A personal guarantee or property security reaches people who are not part of the business decision, and they are entitled to understand it before it is granted.
The trade
What security gives and what it costs.
What it gives
- A materially lower rate, every year the facility runs
- A larger limit, frequently by a multiple rather than a margin
- Access to lenders that will not write unsecured revolving facilities
- A longer review cycle in many cases, since the position is stronger
- A better outcome at review, because the exposure is covered
What it costs
- Exposure to the full limit rather than to a declining balance
- A general security agreement that complicates later asset financing
- Valuation and legal costs an unsecured facility avoids
- A longer establishment process where property is involved
- A decision that reaches beyond the business where a home is involved
The middle position
Security is not one decision.
The framing as secured against unsecured is too coarse, because the middle of the table is where a great many businesses actually sit. A general security agreement over business assets is security, and it exposes the business rather than the family. That is a considerably smaller decision than a mortgage over a home and it captures a meaningful share of the pricing benefit.
A business that has not examined the options frequently assumes the choice is between nothing and the house, when the realistic choice is between a general security agreement and a general security agreement plus property. Asking a lender what it would offer at each of those positions produces three quotes rather than two and frequently a comfortable answer in the middle.
Where commercial property is available and already committed to the business, taking it is usually straightforward. The genuinely hard case is a home, and it is the one worth slowing down for.
When it matters
Three situations where the choice shows.
The facility is fully drawn when difficulty arrives
A limit drawn to $200,000 the week before a problem is a $200,000 exposure, whatever the average had been.
What happens:The security is tested at the worst point rather than at the average one, which is the specific property of a non-amortising facility.
A later financing is blocked
A general security over present and after-acquired property means a new financier cannot take the position it needs without the incumbent’s agreement.
What happens:Delay at best and a transaction that does not proceed at worst, discovered late in the process.
A guarantee reaches a person
Where a personal guarantee or third-party property security exists, a default reaches an individual rather than only a company.
What happens:Consequences outside the business entirely, for someone who may not have been part of the decision.
The first of these is why the honest way to weigh security on a revolving facility is against the limit rather than against the expected drawn balance. The cost saving is calculated on the average and the risk is carried against the maximum.
The honest position
When paying the unsecured premium is right.
Where the only security available is a family home, where the expected drawn balance is modest, and where the annual difference is a few thousand dollars, paying the premium is frequently the better decision. The saving is bounded, 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, since a secured facility takes as long as a valuation and property legals take. Taking an unsecured facility now and refinancing to a secured one when there is time is a legitimate sequence rather than a compromise.
Where it is wrong is on a large, consistently drawn balance for a business with commercial security available and no particular reason to withhold it. There the premium is being paid every year for nothing, and the arithmetic is not close.
Method
How this guide was written, and its limits.
The figures are illustrative and calculated on stated assumptions rather than drawn from any lender’s pricing. What security is worth varies considerably by lender, by what is offered and by the applicant, and the only figures that matter are those a lender puts in writing.
The scope of any particular security document is a legal question. Nothing here is legal advice, this site is not a law firm, and a general security agreement or a guarantee is precisely the kind of document a solicitor should read before it is signed.
Nothing here is financial advice either. This site is not a lender, a broker or a registered financial adviser, and what suits a particular business depends on facts a website cannot see.
Working it out
Three steps that turn this into a decision.
01
Get quotes at three security positions
Unsecured, a general security agreement over the business, and with property. Only two are commonly asked about, and the middle position frequently produces a comfortable answer, capturing much of the pricing benefit while keeping the consequences inside the business.
02
Calculate the saving on the expected balance
Interest at each rate on the average drawn balance the business realistically expects, in dollars per year and across the likely life of the facility. That figure is what security is worth, and it is frequently smaller than the rate gap suggests on a lightly used facility.
03
Weigh it against the limit, not the balance
The saving is earned on the average and the risk is carried against the maximum, because a revolving limit can be fully drawn on any day. Holding both numbers in view at once is the honest way to make the comparison.
A note on guarantees
The document that is treated as a formality and is not.
A personal guarantee is not security over an asset. It is an undertaking by a person to meet the obligation if the company does not, and it reaches whatever that person owns. Guarantees written to cover all present and future obligations do not end when the facility that prompted them is repaid, which surprises people years later.
Independent legal advice is ordinarily required before one is signed, and where it is presented as a formality that is exactly the moment to treat it as anything but. A solicitor reading the document takes an hour and is ordinarily the cheapest part of the arrangement.
The questions worth having answered are what it covers, whether it is limited in amount, whether it ends and when, and what has to happen before it can be called. All four are in the document and none of them is obvious from the conversation in which it is produced.
The middle position, in practice
What a general security agreement actually costs.
Granting a general security agreement is quick, cheap and reversible in a way property security is not. There is no valuation, the legal work is modest, and registration on the Personal Property Securities Register is a matter of dollars rather than hundreds.
What it costs is future flexibility. A financier funding a machine later will want a first-ranking position over that machine, and the incumbent has to agree. That is routine and it takes time, and it is the reason to ask at the outset whether the lender will release specific assets on request.
Against a mortgage over a home, it is a considerably smaller decision. Against nothing, it is a real one that a business should understand rather than sign through. A great many businesses can safely take the middle position, and the ones that examine it are the ones that do so knowingly.
Timing
Security takes longer than businesses plan for.
A general security agreement can be documented and registered quickly. Property security cannot, because a valuation has to be instructed, completed and accepted, and legal work has to be done on both sides. Where an existing lender holds a competing position, a priority arrangement between the two adds further time.
The practical consequence is that a business needing a facility in the current month is choosing an unsecured one whether it intended to or not. That is a legitimate reason to take the more expensive route and refinance later, and it is a poor reason to be surprised.
Starting the valuation early is the single largest influence on how long a secured facility takes. Where a business knows it will want a secured limit within the year, instructing that work before the need arrives converts a six-week delay into no delay at all.
The comparison
What each rate costs on the same balance.
Running the expected average drawn balance at a secured and an unsecured rate gives what the security is worth in dollars. The risk is weighed against the limit rather than that balance. Indicative only, and not a quote or offer of credit.
Indicative interest cost
Weekly
$173/week
$750 /month $9,000 a year while drawn
$200,000
$5,000 $500,000
$90,000
Nothing drawn Fully drawn
10.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $200,000 scenario
$90,000 drawn at 10.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Personal Property Securities Register
The register underlying general security agreements and priority arrangements.
- Personal Property Securities Act 1999
The governing legislation for security interests, registration and priority.
- New Zealand Law Society
Referenced for the point that security documents and guarantees are matters for a solicitor.
- Commerce Commission
The regulator whose guidance covers lender conduct and guarantor disclosure.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Questions, answered
How much does security save?
It varies by lender and by what is offered, and the effect is material rather than marginal on a revolving facility. Running the expected average drawn balance at both rates gives the figure for a particular case.
Why is securing a revolving facility different from securing a loan?
Because there is no amortisation. A term loan’s balance falls on a schedule so the exposure shrinks; a revolving limit can be fully drawn on any day, so the security stands behind the limit for the life of the facility.
What does a general security agreement cover?
The present and after-acquired property of the business, meaning everything it owns now and everything it acquires later. It is broader than a named asset and does not shrink as a facility is repaid.
Does a general security block other borrowing?
It complicates it. A new financier wanting a first-ranking position over a specific asset needs agreement from the incumbent, which is routine and takes time. Asking about asset releases at the outset avoids a late problem.
Is the choice really between nothing and the house?
Rarely. A general security agreement over business assets sits in the middle, captures a meaningful part of the pricing benefit, and exposes the business rather than the family. Asking a lender to quote at each position produces three answers rather than two.
When is paying the unsecured premium right?
Where the only available security 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 is buying something real.
When is it wrong?
On a large, consistently drawn balance where commercial security is available and there is no particular reason to withhold it. The premium is then being paid every year for nothing.
Should the saving be weighed against the limit or the balance?
The saving is calculated on the expected average balance and the risk is carried against the limit. Holding both figures in view at once is the honest way to make the decision.
What is a personal guarantee worth to a lender?
Additional recourse beyond the company, which supports a larger limit and a lower rate. What it costs the guarantor is exposure to whatever the document covers, which can be more than the facility that prompted it.
Can security be released later?
On the terms in the agreement. On a revolving facility that remains in place, release is not automatic in the way it is on a repaid term loan, and how and when it happens is worth reading before signing.
How long does a secured facility take to arrange?
Longer than an unsecured one, and this site does not publish timings. Where property is involved the valuation is ordinarily the longest step, and starting it early is the largest influence on the overall duration.
Is this guide legal or financial advice?
No. It compares two positions in general terms. This site is not a law firm, a lender or a registered financial adviser, and the scope of any particular security document is a question for a solicitor.
Related
Keep reading
Secured line of credit
The secured facility in full.
Read onUnsecured line of credit
The alternative, and what it costs.
Read onThe home loan comparison
Where the security is the family home.
Read onWhat lenders assess
How security fits into a limit decision.
Read onAll eight facilities
Every revolving arrangement compared in the same shape.
Read on