Secured Business Loans

Business loans secured by the assets of your company may be just what you’re searching for.

Business loans secured by the assets of your company may be just what your business is looking for.

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. 

Businesses with assets like commercial property, automobiles, and machinery, as well as company directors, who don’t wish to provide a personal guarantee, can benefit from secured business loans.

For a variety of reasons, you can only borrow as much as the value of your collateral allows you to borrow from different lenders.

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. 

Benefits of secured business loans

  • There is no constraint on how the monies can be spent. This money can be used for purchasing machinery and equipment, developing your business, buying office space, paying your rent/debts/salary and purchasing raw materials.
  • Expanded borrowing options
  • As compared to unsecured loans, secured loans have lower interest rates.
  • Loan repayment terms of up to fifteen years are available.
  • Businesses that were previously unable to acquire unsecured loans can now apply for collateral-based loans.
  • In some cases, tax advantages can be taken advantage of.

 

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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