Secured Business Loans
You can take out a Secured Business Loan, using company assets as loan security.
Using an asset as security against a business loan could be a great way for you and your business to get access to the capital you need. To find out more about the ins and outs of a Secured Business Loan, you can read our guide or, even better, get in touch to talk to us.
Secured Business Loan Guide:
What Is A Secured Business Loan?
This is a business loan using an asset as collateral for the loan. It can also be known as asset-backed finance.
Using an asset as loan security, which could be anything from property to machinery, you can qualify for larger loans than might otherwise be possible. From £5,000 up to £Multi Millions.
As the lender will be using your asset as security for the loan, their risk is lowered, so the rates and terms can be more competitive. Non-payment of the loan, for whatever reason, will put your asset at risk and the lender may repossess it.
What Are the Benefits of Having A Secured Business Loan?
The overall cost of a Secured Business Loan will often be lower than having an Unsecured Business Loan.
The rates and therefore, repayments will normally be lower and because the loan is secured on an asset, the funder can give you more flexible facilities over longer terms.
Larger loans with amounts ranging from £5,000 to over £2m
Borrow up to 100% of the assets’ value
Generous terms to repay, up to 10 years
Lower repayments and interest rates
Poor or bad credit is not necessarily as big a problem
Longer-term solution than unsecured loans
Although the loan will be secured, our funding partners will still be able to give you approvals within a couple of days. We can get to work for you now, it won’t cost you a penny and you won’t be obligated to take the loan.
How Do They Work?
There are various suitable forms of collateral for a Secured Business Loan. You could use land or existing property, or other sorts of security such as equipment, vehicles, stock or other items of value you own.
As with a standard mortgage, the application process may well involve a valuation to be carried out.
Most Secured Business Loans have fixed rates and payments are made over the loan term until it is fully repaid. If you don’t repay, the asset you used as security is at risk and the lender may repossess.
How Much Can I Borrow?
This will be determined by the value of the asset you are using as security for the business loan. If you wanted to borrow £75,000, for example, the asset would need to be worth at least that, and if the lender won’t give you 100% of the value, it would need to be worth more.
What Can Be Used As Security For The Loan?
Our panel of lenders will use a wide range of assets as security for your loan. It’s common to use the following as collateral:
If your business doesn’t have enough in the way of assets, some lenders will use personal assets instead.
As well as the asset being used, you may also need to give a personal guarantee as additional security.
In some cases, lenders can use assets such as Trademarks, Patents and Copyrights you own as the basis for a loan. These are more difficult to arrange, however.
What Advantages Are There?
Secured Business Loans give you several advantages over unsecured options, such as lower repayments. You have to balance the potential risk of using assets as loan security.
With a secured business loan you can benefit from:
Larger loan sizes – Other types of borrowing don’t normally allow for such large loan sizes. The amount of borrowing on a Secured Business Loan will depend on the value of the asset you want to use. In some cases you can get 100% of the value of the asset, so in all cases, it will have to be worth at least what you want to borrow, sometimes more.
The risk to the Secured Business Loan lenders, compared to other lenders, is lower so, the rates are lower too. The lower the rate, the less the repayments will be and the lower the overall cost of borrowing.
Longer terms – With the benefit of the security, lenders are able to offer longer loan terms. Having a longer term spreads the cost and makes the repayments more affordable.
Startup or no trading history – For businesses that are very new, having an asset to secure the loan against can increase the chances of being accepted.
Bad credit rating accepted – Although the credit history and rating won’t be ignored, the impact of a poor rating will be lessened because of the asset being used as the loan security.
Will I be risking my business assets? – Yes, you will be. If you don’t make the payments, for whatever reason, the lender can repossess the asset to cover the debt and interest outstanding.
Will My Business Qualify?
You must be a U.K. registered business, trading for at least 3 months. If you have a poor credit history, the business might need to show an ongoing growth period.
You must own assets suitable for and valuable enough to cover the loan
Be based in the U.K.
Be a Limited Company, LLP or sole trader
Have a minimum 3 month trading period
The application process with our lenders tends to be easier than with more standard lenders. Generally, you probably won’t have to complete a rigorous business plan.
Will I Need A Personal Guarantee Or Security For The Loan?
When applying as a Limited Company or LLP, a personal guarantee may be required, as well as the asset you want to use. Your own personal assets may be used as collateral if your business doesn’t have enough value in the assets it owns.
Anyone who has a 25% or more stake in the business may be asked to provide a personal guarantee.
What If My Property Has An Existing Mortgage?
If the property you want to use as the Secured Business Loan collateral already has a mortgage, it may still be suitable.
The funder could take either a second (or even third) legal charge or equitable charge –
Second legal charge – Where a property already has a mortgage on it, a lender can take a second charge. This ranks behind the first mortgage (second charge holders are paid after the first charge) but a legal charge gives the lender power of sale.
Consent is required from the first charge holder, so this can take time to arrange and funds can’t be released until it has been granted.
Equitable charge – This is a faster process but riskier, as it doesn’t give the lender the power of sale. Equitable charges are faster because they don’t need the consent of any legal charge holders.
I Haven’t Got Any Business Assets, What Now?
You can’t take a Secured Business Loan if you don’t have anything to secure the loan against. The good news is, there are other forms of finance available and depending on what you need the capital for, there will be specialist options that will work for you.
Secured Business Loan Calculator
You can use our Secured Business Loan calculator to give you an idea of what the repayments will be on your loan.
Please note, this calculator is intended for illustration purposes only. Exact payment terms should be agreed with a lender before taking out a loan.
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