Secured business loans

Secured Business Loans – Borrowing to Look After Every Business Expense

It’s difficult to imagine the world of enterprise without external financing. The fact of the matter is, even the established market forces require regular injections of funds in order to keep growing. Securing such funding, however, is easier said than done.
If you are running a business in the UK, secured business loans are among the most accessible financing tools. The fact that such loans are easier to get and more convenient to settle makes them a popular borrowing option, especially among Small and Medium sized Enterprises (SMEs).

What is a Secured Business Loan?

A secured business loan is a type of business loan that requires the borrower to attach an asset as the security against non-settlement. To put it simply, a secured business loan is a loan backed by an actual asset owned by the borrower. This asset is usually a property belonging to the business itself. If the business is unable to furnish such collateral, the owner/director can attach their personal properties/assets as well.

Example

An owner-managed food processing company has recently decided to invest in a more cutting-edge technology. This technology, in the long run, will help save a considerable number of working hours, and hence the corresponding wages. This is a critical decision for the business in order to overhaul their recent streak of slow months. The said technology, however, is expected to cost the business to the tune of £160,000. The business cannot afford to pay such an amount upfront. Hence, to bear this cost, the owner decides to get a secured business loan by attaching the business-owned processing plant as a security.

The business succeeds in getting a loan termed over 10 years at a great interest rate.

Features of an Unsecured Business Loan

The following features characterise secured business loans:

Larger Amounts

If there’s one thing that truly sets secured business loans apart from their unsecured counterparts, it’s the size of the loan. A secured business loan, much like a mortgage, can help the borrower secure a significant sum of money – even up to £1,000,000 with some lenders. This largely depends on the security the borrower is able to present.

Speed of Processing

Asset-backed business loans usually carry brick-and-mortar or land properties as collateral. The loan amount is approved upon successful evaluation of the attached property. This is the bottleneck of the process, as far as the speed is concerned. A secured business loan is available to the borrower within a matter of days, once the initial Agreement in Principle (AIP) is in place.

Flexibility of Repayment

This is a hugely attractive feature for commercial borrowers. Since the loan amounts are significant, it’s only reasonable for the borrower to want to have the luxury of a longer repayment tenure. Secured business loans bring this luxury on board. An average secured business we broker is termed over 5-10 years. Many lenders also allow affordable, monthly repayments inclusive of the interest and the applicable fees.

Interest Rates

Secured business loans carry much smaller risk in the eyes of the lender. Coupled with a longer repayment term, this means that the interest rates charged on such loans are some of the lowest you’ll ever find. These interest rates are comparable with other long-term loans like mortgages and development loans.

Credit Score Dependency

If your business has bad credit, it becomes harder to arrange funds on an urgent basis. A secured business loan, however, can be the best way to tackle such situations. As long as you are able to secure the loan amount with satisfactory collateral, you’ll be able to find many lenders willing to offer you a long-term business loan. In short, secured business loans aren’t always subject to your creditworthiness.