Secured business loans deals
A secured business loan is money you borrow for your business that’s backed by something valuable you own - like equipment, property, or vehicles. These items act as security for the lender, so if you can’t repay the loan, the lender may take those assets to recover their money instead.
Secured business loans can be used for a variety of purposes, including funding business expansion, covering operational expenses, or improving cash flow. The loan amount, repayment terms, and interest rate are agreed upon upfront - and your business repays the loan in instalments over a set period.
Because the loan is secured by assets, it may be easier to qualify for larger loan amounts or enjoy more favourable terms compared to unsecured loans, but bear in mind the application process can take longer.
Your business will have to meet certain lending criteria to qualify for a secured business loan. Providers may look at:
Your business’s annual turnover
Your type of business
Your trading history
Before applying, check your business meets all the provider’s criteria to avoid having your application refused.
How to find the right secured business loan for you
There are a few things you need to think about before applying to ensure you get the best secured business loan for your needs:
Work out how much you need to borrow
What assets you have to secure against
How long you want to take to repay the loan
A secured loan takes a little longer than a credit card or unsecured loan because the lender needs to check the value of what you're offering as collateral, as well as your application.
That means you'll go through a series of steps during the application:
Prepare: Get hold of the necessary documents. These will be things like your accounts, tax returns, a business plan and any financial documents about the assets you plan to secure against the loan.
Research: Take a look at different lenders, loan terms, conditions and interest rates to find the best fit for your needs.
Apply: Decide which provider offers the best deal for you and fill in the application.
First check: The lender decides if it wants to go forward with the deal and what loan amount and interest can be offered.
Evaluation: The lender takes a look at the collateral offered to check it covers the loan amount.
Decision: Once checks are complete, the lender makes a call, either deciding to approve or reject the application.
Outcome: If your loan is approved, you are sent forms to sign and provide the collateral. After that's completed the lender transfers the cash to you.
You can use almost any valuable asset as collateral for a secured business loan, it doesn't have to just be physical items like property or equipment either.
Many lenders also accept non-physical assets such as outstanding invoices, future sales or unsold inventory. As long as the asset has some measurable value, it can potentially be used to secure funding.
Here’s an example of how much a secured business loan could cost and the repayments your business would need to make:
Amount borrowed: £100,000
Collateral: Business machinery
Loan term: 10 years
Interest rate: 30% APR
Monthly repayments: £2,383.33
Total cost: £285,999.60
Alternatives to secured business loans
Alternatives to secured business loans
Unsecured business loans
Unsecured business finance - whether it's a business credit card, overdraft or traditional business loan - doesn't put your assets at risk if things go wrong. But they might come with higher interest rates or offer less cash overall.
It's always worth checking them out alongside secured options.
Angel investments
Business angels are people who have already made money and are now looking to support the next generation of entrepreneurs.
They'll often ask for a stake in your business - say 10% to 25% - but they can also provide advice and contacts as well as cash.
The biggest problem is finding one, although the Angel Investment Network could be a good place to start.
Venture capital
As well as business angels, there are companies that invest in up-and-coming businesses in return for a stake in them too.
This is a more formalised process, the companies are looking to profit themselves too, but the idea is the same.
You give up a minority stake in your business, they hand over some funding. Tracking one down is, again, a potential issue, although the British Private Equity & Venture Capital Association is a good place to start.
Private equity
Private equity works a lot like venture capital, except the people providing cash in exchange for a stake in your business are a private fund rather than a public one.
This could be a group of people looking after the personal fortune of a family or trust fund for example. It means there might be fewer restrictions on who they offer money to, as it will be in line with a specific person's goals rather than a straight profit motive.
The British Private Equity & Venture Capital Association is a good place to look for investors.
Business grants
Depending on what you need the money for, you might be able to get a development grant or other type of grant.
There is funding available for environmentally friendly equipment, research and development, regional growth and a lot more.
You can see what's available from the government here, or check out your local council's website.
Crowdfunding
Rather than convince a single person or firm to part with a lot of cash, crowdfunding offers the chance to get a lot of people to part for a little.
You can offer rewards in exchange for investments or offer equity in your business, but you might not get anything if you don't hit your funding target.
Seedrs is a decent option if you're interested in equity crowdfunding or there's Indiegogo and Kickstarter for rewards-based crowdfunding.
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