Secured Business Loans
A secured business loan is a type of loan where you use something valuable, like property or equipment, as collateral to back it up. These loans often come with lower interest rates and allow you to borrow more because the lender feels more secure.
If you’re eligible for secured finance the lender will agree to lend you a sum of money based on the value of the business asset (or assets) you’re using as security. The lender will also consider your business’ financial circumstances and needs.
- Lower interest rates
- Larger sums
- Longer repayment terms
- 6-month trading history
- Less focus on trading/credit history
Secured vs unsecured business loans
An unsecured business loan doesn’t require you to offer business assets as security. However, the lender still needs to feel confident that you can repay in order to lend to your business, so they will look closely at its credit rating and trading history.
Unsecured business loans could suit businesses that don’t own assets, would prefer not to offer an asset as security, or those who need finance quickly.
Unlike a secured business loan – which is largely informed by the value of the asset offered as security – the amount you can borrow through an unsecured option will typically be a multiple of your annual business turnover.
Unsecured finance tends to be quicker to arrange because you don’t need to go through the asset valuation process. You’ll probably get the funds quicker but interest rates are usually higher.
By offering business assets as security, you’re reducing the level of risk from the point of view of the lender. In this sense, unsecured finance is seen as riskier which is why interest rates can be higher. With secured finance, you’re more likely to be able to borrow a larger amount over a longer period and at a lower interest rate.
Secured or unsecured, always consider the total cost of the loan. If you borrow funds at a low interest rate, bear in mind that costs can accumulate over the long term.
