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Secured Business Loans
- Higher approval rates
- Larger loan amounts
- Longer terms available
- Potential for lower rates
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Both a lender & broker
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Over £1.5bn financed since 2007
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Expert personal service for over 20k SMEs
Secured Loans for Business
A secured business loan uses collateral in order to reduce risk to the lender. This approach often means that rates can be lower and terms longer as well as the chance of approval increased. Typically secured loans might use a business asset such as machinery, vehicles or a commercial property, personal assets might also be considered.
3 Steps to get Secured Business Finance
We know that finance can sometimes be confusing and stressful, but what we do is simple.
What is a Secured Business Loan?
A secured business loan is a type of loan where a borrower pledges collateral to secure the funds they borrow. Collateral can be any valuable asset owned by the business, such as real estate, equipment, inventory, or accounts receivable. By providing collateral, the borrower reduces the lender’s risk, making obtaining the loan easier and potentially securing more favourable terms.
How Does a Secured Business Loan Work?
When you apply for a secured business loan, the lender assesses the value of the collateral you are offering. This evaluation helps determine the maximum amount you can borrow, which is usually a percentage of the collateral’s value. Suppose your business fails to repay the loan as agreed. In that case, the lender has the right to seize and sell the collateral to recover the outstanding debt.
What assets can be used for a Secured Business Loan?
Secured business loans are a flexible option, as most lenders accept a wide range of both tangible and intangible assets as collateral. This makes them accessible to businesses across various sectors.
Common tangible assets that can be used include:
- Property
- Land
- Machinery
- Equipment
- Vehicles
- Accounts receivable
Intangible assets, such as: Trademarks, Copyrights, Intellectual property, Licenses, and patents, may also be accepted by some Lenders, however, our Lending panel do not accept this form of asset as collateral for secured business finance.
In some cases, you may be required to offer multiple assets or even personal assets. Additionally, many lenders may require a personal guarantee to secure the loan.
Eligibility & Requirements for a Secured Business Loan
Secured business loans come with specific eligibility criteria and requirements that businesses must meet to qualify for this type of financing. Understanding these factors will help determine if your business is eligible and adequately prepared to apply for a secured loan. Here are the common eligibility requirements for securing a business loan you might encounter depending on your chosen lender:
- Sufficient collateral
- Demonstrated business stability
- Good credit score
- Financial statements
- Business plan
- Personal guarantee
What is the difference between Secured & Unsecured Loans?
Secured vs. Unsecured Business Loans
Portman offers both secured and unsecured types of business loans. Which works best for your business?
- Secured loans require you to pledge an asset, such as equipment or property, as collateral. This can typically lower your interest rate but puts the asset at risk if you default. Asset finance is an example of this option.
- Unsecured loans do not require collateral but may have a higher interest rate. To qualify for an unsecured loan, you may need to provide a personal guarantee meaning the owner takes responsibility for repayment if the business can’t.
Secured vs. Unsecured at a glance…
| Secured Loan | Unsecured Loan | |
|---|---|---|
| Collateral Required | Yes | No |
| Interest Rate | Lower | Higher |
| Risk to Business | Asset at Risk if Default | No Asset Risk |
| Security | Uses the Asset | Usually PG or Debenture |
| Early Repayment | Yes | Yes |
Both options offer flexibility in managing your finances. You’ll repay the loan with regular payments and own any equipment purchased with the funds. The majority of business loans arranged by Portman are unsecured but many options are available.
Our team of experts is ready to help
What are the Advantages of a Secured Business Loan?
With a secured business loan, you can look forward to various advantages and benefits for your business. From a greater chance of success with your application to a larger potential loan with better terms, we have broken down the advantages of secured business loans you should consider.
Higher Approval Rates:
Compared to unsecured loans, secured loans have higher approval rates because the collateral acts as a form of security for the lender. If you have less-than-perfect credit or limited operating history, a secured loan might be more accessible than other financing options.
Lower Interest Rates:
Secured loans typically come with lower interest rates compared to unsecured loans. Since the lender faces less risk, they can offer more competitive rates, resulting in lower monthly payments and potentially saving your business money in the long run.
Larger Loan Amounts:
The availability of collateral allows you to secure larger loan amounts. This can be beneficial when you need substantial funding for expansion plans, purchasing equipment, or launching new products or services.
Longer Repayment Terms:
Secured loans often come with longer repayment terms, allowing you to spread out the loan payments over a more extended period. This can reduce the strain on your business’s cash flow and provide more flexibility in managing your finances.
Secure your Business Loan with Portman
Ready to explore your options for a secured business loan? Our team is here to help.
At Portman, we understand the unique needs of businesses and can guide you through the process of obtaining the financing you need. Whether you have questions about collateral, eligibility criteria, or loan terms, we’re here to provide personalised assistance. Get in touch with us today to discuss your specific requirements and find the secured loan solution for your business’s growth and success.
Alternatively, find out more about unsecured loan options and available equipment finance solutions.
Secured Business Loan FAQs
For more information on secured business loans, find the answers to our most frequently asked questions below. If you have a query that has not been addressed, contact the team at Portman for further advice and guidance.
Can I get a secured business loan with bad credit?
Getting a secured business loan with bad credit can be challenging but not impossible. It depends on the value of the collateral you can provide and its evaluation by the lender. Having valuable collateral can offset the impact of bad credit. Additionally, alternative lenders may offer more flexible options. However, it’s important to consider higher interest rates and assess your ability to repay the loan. Seeking guidance from lenders or a financial advisor can improve your chances of securing a loan despite bad credit.
Are there any risks with a secured loan?
While secured business loans offer significant advantages, it’s important to consider potential risks:
- Asset Risk: By pledging collateral, you are putting the associated assets at risk. If your business fails to repay the loan, the lender can seize and sell the collateral, potentially resulting in a loss for your business.
- Responsible Borrowing: Remember that a secured loan is a financial obligation. It is essential to evaluate your business’s ability to make timely loan repayments before committing to borrowing.
- Collateral Valuation: The loan amount you receive depends on the value of the collateral. It’s crucial to understand your assets’ worth and ensure they align with your funding needs.
What can be used as collateral for a secured business loan?
Collateral for a secured business loan can include real estate, equipment, inventory, accounts receivable, securities, or cash savings. These assets serve as security for the loan, and the lender assesses their value. The specific collateral options and their evaluation process may vary among lenders. It’s important to carefully consider the assets you pledge as collateral since they can be at risk if the loan is not repaid.
Our experts can find the right funding for you.
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