Secured business loans
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Secured business loans at a glance
What can I use as security?
You can use valuable business or personal assets as security, such as commercial property, equipment or vehicles. The assets you can use will depend on the lender and the type of loan.
How much can I borrow?
Secured business loans typically offer higher borrowing limits than unsecured loans. How much you can borrow depends on the value of your security, your business finances and the lender's criteria.
What happens if I can't repay?
If you fall behind on repayments, your lender may be able to repossess the asset you've used as security. Make sure you're confident you can afford the repayments before taking out a secured loan.
What is a secured business loan?
A secured business loan is a type of business finance that's backed by an asset your business owns, such as commercial property, equipment or vehicles. The asset acts as security for the lender, meaning it could be repossessed if you don't keep up with your repayments.
Because the lender takes on less risk, secured business loans may often come with higher borrowing limits, lower interest rates and longer repayment terms than unsecured business loans.
Key features of secured business loans
An asset is used as security: This reduces the lender's risk, but could be repossessed if you fail to repay.
Higher borrowing limits: Lenders are often willing to lend larger amounts than with unsecured loans.
Competitive interest rates: You may qualify for lower rates because the loan is backed by security.
Longer repayment terms: Spreading repayments over a longer period can help manage cash flow.
Funds can be used for almost any business purpose: From expansion and equipment purchases to working capital and refinancing existing debt.
How do secured business loans work?
Understand how using an asset as security can help your business access finance:
You apply for a loan and offer an asset as security.
The lender assesses your application and the asset's value.
If approved, you receive the funds.
You repay the loan in regular instalments.
What assets can you use for a secured business loan?
Lenders may accept a range of business assets as security, depending on their value and the type of loan you're applying for. Common examples include:
Property or land: Commercial property, premises or land owned by your business can be used as security.
Equipment and machinery: Business equipment, tools and machinery can help secure funding - particularly if they have a clear resale value.
Vehicles: Company vehicles, such as vans or specialist vehicles, may be accepted as security by some lenders.
Inventory or stock: Goods your business owns, such as products or materials, may be used as security in some cases.
Outstanding invoices: Some lenders may accept unpaid customer invoices as security to help businesses access funding before invoices are paid.
Is my business eligible for a secured business loan?
Lenders assess your business's financial health and ability to repay before approving a secured business loan. Eligibility criteria vary between providers, but they'll typically look at:
Annual turnover: Some lenders set minimum turnover requirements, which can range from around £10,000 a year for smaller business loan products to much higher amounts depending on the size of the loan you need.
Trading history: Many lenders require businesses to have been trading for at least 3 months, although some may ask for 1-2 years of accounts before approving larger loans.
Business credit report: Your business credit score and repayment history can help lenders assess how reliably you've managed borrowing in the past.
Cash flow: Providers may review your current cash flow and forecasts to check you can afford repayments alongside your existing business costs.
Business type: Your industry, legal structure and how your business operates can affect whether a lender is willing to offer finance.
Available collateral: As secured loans are backed by an asset, lenders will also consider whether your proposed security is suitable and has enough value to cover the loan.
How much can I borrow with a secured business loan?
The amount you can borrow with a secured business loan depends on two main factors:
the market value of the asset you use as security
your business's ability to make repayments
Exact loan amounts can vary widely depending on the lender, the type of asset used as security, and the size of your business.
Smaller secured business loans from high street banks may start from around £10,000 and can reach £100,000 or more, while specialist lenders may offer loans of up to £10 million for larger assets such as commercial property.
It's important to note that lenders will not usually lend you 100% of an asset's value. Instead, they'll consider factors such as the asset's market value, how easily it could be sold and the level of risk involved. An asset worth £100,000 does not necessarily mean you can borrow £100,000 against it.
Lenders will also assess your turnover, cash flow, credit history and existing financial commitments to make sure your business can afford the repayments.
What fees are involved with a secured loan?
As well as interest, secured business loans may come with additional fees. The exact costs vary between lenders, so it's important to consider the full cost of borrowing before applying.
Common fees may include:
Arrangement fees: A charge for setting up the loan, which may be a fixed amount or a percentage of the amount borrowed.
Valuation fees: If you use an asset such as property or equipment as security, the lender may charge to assess its value.
Legal fees: Some secured loans require legal work to register the lender's charge over the asset, particularly when property is used as security.
Early repayment fees: Some lenders may charge a fee if you repay the loan before the agreed term ends.
Broker fees: If you use a broker, you may need to pay a fee depending on the service provided.
The total cost of a secured business loan will depend on factors such as the amount you borrow, your interest rate, repayment term and any additional fees.
Use our loan repayment calculator to get an idea of how much your loan could cost and what your monthly repayments may look like.
How to find the right secured business loan for you
Finding the right secured business loan isn't just about choosing the lowest interest rate. Taking the time to compare different options can help you find a loan that's a good fit for your business and its long-term goals.
Work out how much you need to borrow
Before applying, work out exactly how much funding your business needs and what you'll use it for. Borrowing more than necessary could mean paying more interest over the lifetime of the loan, while borrowing too little may leave you without enough funds to achieve your goals. Consider your planned expenses, expected cash flow and how much you can comfortably afford to repay each month.
Consider what assets you can use as security
Secured business loans require an asset to act as security, which reduces the lender's risk. This could include assets such as commercial property, equipment, vehicles or other valuable business assets, depending on the lender’s criteria. The value and type of asset you provide can affect how much you're able to borrow.
Choose a repayment term that works for your business
The repayment term affects both your monthly payments and the total cost of the loan. A longer term can reduce your monthly repayments, but you'll usually pay more interest over time. Choose a repayment period that fits your business's cash flow and future plans, while making sure repayments remain affordable throughout the loan term.
How to apply for a secured business loan step-by-step
Gather the documents lenders need to assess your application. This may include your business details, accounts, bank statements, tax returns and information about the asset you plan to use as security.
Compare different lenders, loan amounts, repayment terms and interest rates to find a secured loan that suits your business needs.
Complete your application and provide the required documents. The lender will review your business finances and carry out checks on the asset you're using as security.
The lender will assess your application, the value of your asset and your ability to repay the loan before deciding whether to approve your application.
If approved, you'll sign the loan agreement and complete any security paperwork. The lender will then transfer the funds to your business account, and you'll begin repayments as agreed.
What can I use a secured business loan for?
Common uses for secured business loans include:
Business expansion: Funding new premises, refurbishments, opening new locations or investing in growth opportunities.
Equipment and vehicles: Buying machinery, technology, commercial vehicles or other assets needed to run and grow your business.
Working capital and cash flow: Covering day-to-day expenses, managing seasonal fluctuations or funding periods where cash flow is tighter.
Acquisitions and growth: Funding business purchases, mergers or buying out a partner.
Refinancing existing debt: Consolidating existing business borrowing or replacing higher-cost finance with a more suitable loan.
Advantages and disadvantages of secured business loans
Pros
Cons
Alternatives to secured business loans
Typically used for: Borrowing money without putting assets up as security.
Unsecured business loans can provide access to funding without risking your business assets if you're unable to repay. However, they may have lower borrowing limits or higher interest rates than secured loans.
Typically used for: Covering everyday business expenses and managing short-term spending.
A business credit card can help you pay for costs such as supplies, travel or subscriptions without using your cash immediately. Some cards offer rewards or interest-free periods, but you'll need to manage repayments carefully to avoid paying interest.
Typically used for: Unlocking cash tied up in unpaid invoices.
Invoice finance allows you to access money owed by customers before they pay. This can help improve cash flow, especially if your business has long payment terms or regular outstanding invoices.
Typically used for: Buying equipment, vehicles or other business assets.
Asset finance allows you to spread the cost of purchasing business equipment or vehicles, without paying the full amount upfront. The asset itself is usually used as security, which can make it a useful alternative if you need funding for a specific purchase.
Typically used for: Accessing funding based on future card sales.
A merchant cash advance gives you an upfront sum of money in exchange for a percentage of future card takings. Repayments usually adjust depending on your sales levels, making it a flexible option for businesses with regular card revenue.
Alternatives to secured business loans
Unsecured business loan
Business credit card
Invoice finance
Asset finance
Merchant cash advance
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FAQs
Yes, you may still be able to get a secured business loan with bad credit, as offering security can reduce the lender’s risk. However, lenders will still consider factors such as your credit history, business finances and ability to afford repayments. Having bad credit may also affect the amount you can borrow and the interest rate you’re offered.
The documents you need will vary by lender, but you’ll typically need information about your business, finances and the asset you’re using as security. This may include business accounts, bank statements, cash flow forecasts, proof of identity and details of the asset.
Yes, some lenders may allow you to use personal assets, such as property, as security for a business loan. However, this means the asset could be at risk if your business cannot keep up with repayments. Always check the terms and risks before applying.
Secured business loans often have lower interest rates than unsecured loans because the lender has an asset to fall back on if repayments aren’t made. However, the rate you’re offered will also depend on factors such as your business finances, credit history, loan amount and the value of your security.
A secured loan may not always be the cheapest option, so it’s important to compare different types of finance.
It depends on the lender and your business circumstances. Some lenders may require a personal guarantee alongside security, while others may not. A personal guarantee means you could become personally responsible for repaying the loan if your business cannot. It is always important to check the loan terms before applying.
If you miss repayments, your lender may charge fees. This could ultimately affect your business credit score. If you continue to miss payments, the lender may take action to recover the debt, including repossessing and selling the asset used as security.
Not always, but some lenders may ask for a business plan, especially for larger loans or if your business has a limited trading history. You may also need to provide financial information, such as accounts, cash flow forecasts and details of how you plan to use the funds.
Some lenders may allow you to use a personal secured loan for business purposes, but it will depend on their terms and your circumstances. A business loan is usually more suitable for business borrowing as it is designed around your company’s needs and may offer different protections and features. Always check with the lender before applying.
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