Secured Business Loans

Secured business loans are, as the name suggests, a loan which is backed up by a security. This will usually be a valuable asset that your business owns, such as a home. This allows the lender to have security if the loan is unable to be paid back. 

As a result secured loans are higher-value business loans because they are less risky for the lender. This means that they usually have cheaper interest rates. However, as the borrower, they are riskier, as if you cannot make a repayment, then your asset can be repossessed.

Secured loans can also be referred to as home equity loans, second charge mortgages, first charge mortgages, asset-based lending or debt consolidation loans. 

Lower Interest Rates

The interest rates are low and the loans are usually higher value because the loan is secured against your home.

BENEFITS

Better Terms

The loan usually has better terms, so come with longer repayment periods. The loan usually has better terms compared to unsecured loans, so they come with longer repayment periods. Repayments are typically made monthly basis.

BENEFITS

Who is it suitable for?

Essentially, a secured loan is suitable for any business that has appropriate assets which can be used as security for the loan, such as property, stock, vehicles or machinery. If the business doesn‘t have suitable assets, then it might be possible to offer the owner’s residential property as security. 

It could also be appropriate where the directors of the business are unable to offer a personal guarantee on anything they borrowed – some lenders will provide a secured loan without this guarantee in place. 

Some lenders might also only consider applicants who have been trading for a defined period, who have a strong credit history or who have a minimum annual turnover above a specified limit.

However, there are many lenders active in this market, so if one lender turns you down citing one of these reasons, then it’s well worth trying another. 

How Much Does It Cost?

Secured loans are less risky for lenders as they are secured against an asset, so they are generally cheaper than unsecured loans. But, because the lender can repossess the security, such as your home, they can be riskier for the borrower. 

Most secured loans have a variable rate which may possibly rise. The rate you’re offered may depend on how much you want to borrow, your credit score, how long you want to borrow for and the value of the security.

Qualifing questions

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