What are secured business loans?
Secured business loans are higher value loans that are secured by the borrower’s assets. These loans are suitable for business that own assets such as commercial property, vehicles, and machinery.
Typical uses for a secured business loan could include funding for the purchase of a commercial property, office refurbishment, company expansion, and new machinery. All that requires a significant amount of capital.
Assets you can use as security
Commercial property- Vehicles
- Land
- Equipment
- Fittings and fixtures
Benefits to Secured loans
- Lenders class secured loans as lower risk as the asset is an assurance of repayment. This ultimately means lenders are more confident in lending to the business as well as being able to be more flexible with their terms, competitive interest rates and longer repayment terms.
- Because of the lower risk, this leads to lower interest rates.
- Businesses can typically borrow more with a secured business loan depending on the value of the physical asset it is being secured against. The more asset’s you put forward as security the more you may be eligible to borrow.
Limitations to Secured loans
- Due to the loan being secured against assets failure of repayment the asset will be seized.
- This form of loan can take longer to process than an unsecured loan as valuations need to take place against the asset as well as other legal checks.
Case Study
Our client is a private medical company based in greater London providing services such as physiotherapy, personal training, acupuncture, massages, sports therapy as well an animal veterinary side of the business. The staff are all self-employed, and are highly trained and experienced, working from a gold standard clinic.
We were first approached in 2017, looking for advice on the best option for funding their expansion. As the business was growing and becoming more successful, it was agreed to work from a larger building.
When they got in contact with one of our experts, it was agreed that the best option for the business was to take a secured loan, due to the large sum of money needed in order to acquire a new and larger building.
To read more information on commercial mortgages click here.
What are the benefits of taking a secured loan?
- Lenders class secured loans as lower risk as the asset is an assurance of repayment.
- The client paid lower interest rates, as secured loans are lower risk.
- Being able to borrow a large amount due to the asset it was being secured against.
Once the lender finished with their valuations, the Client was accepted for a £250k loan. With this, they were able to purchase a new building that was 4 times the size of the original one. Since then they have been able to hire more staff and create a better customer experience, which is proving to be very successful.
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