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Secured business loans
Compare secured business loans
Compare secured business loans to fund growth or expansion
Secure funding for business equipment and other business costs
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What is a secured business loan?
A secured business loan is a type of borrowing that needs your business to use an asset as security against the loan. If you can’t keep up with repayments, the lender will keep your asset.
Business loans are usually secured against property, equipment, stock, land or anything else of value that you or your business might own.
Lenders are usually able to offer lower interest rates on secured loans because the asset is used as a guarantee to reduce the risk to the lender. This also means businesses can often borrow more money than if they were to take out an unsecured loan.
How does a secured loan for a small business work?
Secured loans for small businesses work much the same as most other types of business lending.
A lender, which could be a high street bank, challenger bank or alternative lender, will allow your business to borrow a certain amount. The amount you can borrow and the terms you’re offered will be based on your needs and how much security you can put up to guarantee the loan. Your business will then pay back the loan in monthly instalments, at an interest rate that’s been agreed in advance.
How much you can borrow, over how many months, and at what rate are all dependent on how much of a risk the lender considers you to be. When working out risk, lenders will look at things like the type of business you run and how long you’ve been trading, along with the information held on your credit file.
If you fail to make repayments on a secured business loan, the lender might claim ownership of any assets that you put up as security.
What can a secured business loan be used for?
Secured business loans are often any purpose loans, which means they can be used for any legitimate business expense.
But before they’ll agree to lend to you, your lender might want to know what you plan to spend the money on. This can also affect the terms of the loan. Typically, a secured business loan might be used to help you grow your business, for example by investing in new equipment or extra staffing.
What assets can be used as security on a business loan?
In theory, any asset with value can be used as security to guarantee a business loan. But there are certain assets that tend to be used more than most, including manufacturing equipment, machinery, vehicles, or even land.
Some lenders will allow you to use cash as security. But cash secured business loans are likely to have different terms attached compared to those secured against assets.
Property can also be used as security on a business loan, and your lender might consider both personal property and property that is owned by your business. But bear in mind that using your home as security can be a risk as you could lose the house you live in if you can’t keep up with repayments.
If you put up a mortgaged commercial property or land as security, the lender can register this in one of two ways:
- A legal charge gives the lender the authority to sell your property if you can’t keep up with repayments. This process can be time-consuming as the lender will need to get the nod from the mortgage provider, and this isn’t always a given.
- An equitable charge means the lender doesn’t have the power to sell your property, they can get a court order to do so if you can’t keep up with repayments. This often gives the lender enough security to approve the loan.
What are the advantages and disadvantages of a secured business loan?
A secured loan could be an option if your small business owns assets and is looking to get finance. That’s because secured loans are generally cheaper than many other types of business borrowing. It is also often the case that you can borrow more if you are using assets as security.
Another potential advantage for some businesses is that there is less need to prove you have a solid trading history or good credit rating, as the asset you use will guarantee the loan for the lender. That is why secured business loans are often an option for startups or businesses with a poor credit rating.
A disadvantage of a secured business loan is that you are in danger of losing the asset you put up as security if you can’t make your monthly repayments. That is why they are not suitable for all businesses.
Sometimes, secured loans can take longer to arrange than other types of financing, so they may not be your best option if you need funds quickly.
Secured loans
What is a secured business loan?
How does a secured loan for a small business work?
What can a secured business loan be used for?
What assets can be used as security on a business loan?
What are the advantages and disadvantages of a secured business loan?
Compare secured loans with our finance division Think business loans
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Secured business loans FAQs
To help you understand more about secured business loans, here are the answers to some of our most frequently asked questions.
Are small business loans secured or unsecured?
Small businesses can apply for both secured and unsecured loans, based upon their needs and circumstances.
Can you get a business loan without security?
Business loans are available without security. These are known as unsecured loans and may come with lower borrowing limits and higher interest rates as there is more risk to the lender.
Is your business eligible for secured business loans in the UK?
If you or your business owns any assets, you should be eligible to apply for a secured business loan in the UK, especially if you own property that you are prepared to put up as security.
But you still need to meet the individual lender’s own eligibility criteria. This usually includes conditions related to the annual turnover of your business, its trading history, the type of business, and your own credit history.
Can you get a secured business loan with poor credit?
Yes, you can get a secured business loan with bad credit, but your credit rating could count against you when negotiating interest rates.
That said, using your assets to guarantee the borrowing could mean you may have a better chance of having a secured loan application accepted, even if you don’t have a good credit rating. This means that lenders will have a degree of reassurance about lending to your business. But it also means you could be liable to lose any assets you use as security should you be unable to make your loan repayments.
What can I use to secure a business loan?
This depends upon the lender, but businesses can usually put up a range of tangible assets (physical items) as security. This includes things like property, stock, equipment, machinery, vehicles, and land.
Some specialist lenders might also accept intangible assets (non-physical items), such as copyrights, patents, trademarks, and intellectual property.
What are the alternatives to secured business loans?
There are many alternative financing options if you are unable or unwilling to get a secured business loan. You could opt for an unsecured loan, which might be more expensive in terms of interest but does not require you to use assets as security.
There are also shorter-term borrowing options, such as invoice financing, business credit cards, or a bank overdraft.
There are many alternative financing options if you are unable or unwilling to get a secured business loan. You could opt for an unsecured loan, which might be more expensive in terms of interest but does not require you to use assets as security.
There are also shorter-term borrowing options, such as invoice financing, business credit cards, or a bank overdraft.
How to compare secured business loans with Bionic and Think
You tell us how much
you need to borrow
Let the team at Think know how much you need to borrow and what you’ll use the finance for. They’ll use smart data to find out more about your business.
We compare secured business
loans and lenders
The team at Think will compare secured business loans from a panel of providers – including high street banks and alternative lenders - to find the right finance for your business.
We’ll take care of your
application
You then choose the loan you want. Think’s tech-enabled team will answer any questions you have and help with the application to improve your chances of approval.
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