Secured business loans can suit any organisation that has valuable assets that can be used as collateral. This can be vehicles, property, machinery, equipment or even in some cases furniture and fittings. While some businesses don’t have many tangible assets, many others do.
Benefits and disadvantages of a secured business loan
A secured business loan can be very useful but we recommend you consider all points when your assets are at stake. Let’s take a look at both sides of the argument.
If you have spent time cultivating a strong portfolio of assets, you can use them as collateral to access significant funding.
With security offered, some lenders don’t always see a company’s trading history as the most important qualification, because the risk of non-payment is already lessened.
Similarly to unsecured loans, the size of the lending market means that there are many options for every business, and you can find a loan with the right amount and contract length for you.
If you default on repayments for the loan, then you risk losing the assets that you have used as collateral. The lender you have your facility with will take ownership of them and sell them for reimbursement to cover the cost.
Most lenders purely charge interest up until the point you fully repay the loan, however this isn’t an industry-wide stance so we’ll check if this is something you might be concerned about.
What are the costs involved?
Costs involved with a secured business loan will be different between lenders and depend what the interest rates are and what has been agreed for the repayment terms. They will also depend on factors such as how much money you’re borrowing, which in turn depends on your credit score and/or annual turnover.
As a general rule, only businesses with a minimum turnover of £50,000 will be considered for a secured business loan.
If you’d rather not put up your assets as collateral, you can try an unsecured loan where no assets are required. However, as a director of the business will have to provide a personal guarantee to ensure that you will be able to pay back the loan even if the business cannot.
Compare and consider your options for loans by using our online form to arrange a quick call back from one of our consultants and find the most suitable funding for your business.
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