Secured business loans
A secured loan is a great option if you’re looking to borrow a large sum of money and you need to repay it over a longer period of time.
What is a secured business loan?
A secured loan means a business borrows money by offering assets such as property or equipment as security to the lender.
The loan could be secured against business premises such as office buildings, warehouses or retail units. It may also be possible to use other business assets like vehicles, plant and machinery.
Because the loan is backed by tangible assets, the risk to the lender is lower. It means you can borrow more compared to an unsecured loan, and the interest rate is likely to be lower and the repayment period longer.
Thoughts from Matt
“A secured loan can be a great way to borrow larger sums of money over a longer period of time. The lender uses assets from your business as security against the loan, meaning you can get a better interest rate and borrow more money.
But be aware that if you are not able to repay the loan, you risk losing your assets. Make sure you are able to afford the repayments so you don’t put your business and assets at risk.“
Founder and CEO, Funding Guru
How a secured business loan works
A secured business loan means the borrower offers up assets such as property, machinery, equipment, inventory and vehicles as collateral.
This means that if you are unable to repay the loan, the lender can sell these assets to recover their money.
Borrowers apply to a lender such as Funding Guru, specifying how much they are looking to borrow and details of the security offered.
We will then assess the application, taking into account a company’s credentials, history and credit rating.
You will be required to demonstrate you are borrowing money for a specific business purpose, such as buying stock or machinery.
If an offer is made, the repayment terms and interest rate will be clearly spelled out in the paperwork.
Our secured business loans are typically repaid over a period of up to 5 years, so it’s not quite the same as a commercial mortgage that is repaid over a longer timeframe.
The process from beginning to end may take several weeks as there is more paperwork compared to an unsecured loan. As a lender, we will need to get an independent valuation to confirm the suitability of the assets being offered as security, and a lawyer will be instructed to issue and register the loan documentation.
How much can I borrow?
You are likely to be offered up to a maximum of 75% of the value of your assets, although in certain circumstances it is possible to borrow up to 100% of the value if additional security can be offered.
Chat to us today for quick guidance on how much you could borrow.
Secured business loan approval process
At Funding Guru, we work closely with you to understand specific needs and we’ve loaned millions of pounds to hundreds of businesses.
Our repayment terms are up to 5 years and we accept applications from any industry. We offer flexible repayment terms, fixed interest rates and no hidden fees or early repayment charges. We’re here to help make your growth vision a reality.
To start the process, contact us online today. If you would prefer to speak to an adviser on the phone, call us on 0333 006 9141.
What can a secured loan be used for?
A secured loan can be used for anything, including the below.
The different types of secured loans
There are many types of secured business loans, with the most common listed below.
SME lending statistics UK
Many companies turned to loans to help them get through the Covid-19 pandemic, and figures from UK Finance suggest loans continue to provide an important source of funding:
Gross lending to SMEs through loans and overdrafs
Secured loan vs unsecured loan
The below chart shows the main differences between a secured and unsecured loan.
Pros of a secured business loan
The amount you can borrow will be boosted by the value of your asset. This contrasts to an unsecured loan, where the amount loaned is more determined by turnover.
There are less strict requirements on credit rating and debt-to-income ratio with a secured business loan compared to an unsecured loan.
Because you are offering assets as security, the risk to the lender is lower and they are likely to offer a lower interest rate.
Because you are likely to borrow more money, the loan term is longer than an unsecured loan.
Your company’s trading history and credit report is likely to be less crucial to lenders, as you are offering assets as a strong guarantee you will repay the money.
Cons of a secured business loan
Like all borrowing, you should think carefully about how you will repay the loan. Below we list some of the key risks of bridging loans.
The biggest risk is that you can’t repay the loan and lose your assets as a result.
If requesting to borrow a large sum of money, you may face higher fees. You may also have to pay charges to cover the cost of an independent valuation on the value of your assets.
It may be weeks before you are approved by a lender, and months before you get the money. This is because the lender has to do a higher level of due diligence compared to an unsecured loan.
Because you may be borrowing money over a long period of time, the interest rate may sound low but will mount up over time.
Got any more questions? Contact one of the team at Funding Guru today.