By using a commercial asset, such as property, equipment or land, as security against your loan, you could access a high value secured business loan from £25,000 to £2 million. This form of lending is also known as asset-backed lending; the amount you can borrow, along with the interest rate and repayment terms, are favourable for businesses that own tangible company assets.
A secured business loan allows businesses to access funds of up to £2million by providing an asset as security for the loan. This security is used to lower the risk for lenders; in the event your business is unable to repay the loan, the asset will be sold to recover the funds. With a secured business loan, the amount available to borrow is usually greater than any other type of business loan. As high value commercial assets are generally used as security against a secured business loan, interest rates and repayment terms tend to be very competitive. A suitable business asset typically includes commercial property, land, machinery, vehicles and equipment. Some lenders accept a net worth of all assets. In certain circumstances, you can offer personal assets, such as a car, property and shares as security against your secured business loan.
It is often cheaper to repay a secured business loan than an unsecured business loan as the repayments and interest rates are generally lower. Lenders offer greater flexibility with their funding arrangements and can offer generous repayment terms of up to 10 years.
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A secured business loan is generally secured against an asset such as a commercial property or home. The process is similar to applying for a mortgage and can involve a valuation process. In some cases, the loan can be secured with other forms of personal or business assets such as equipment, machinery, vehicles or other inventory. A personal guarantee may also be required as another form of security.
When compared with other types of business loans, lenders of secured business loans typically offer larger loan amounts. The amount available to borrow is usually determined by the value of the collateral used as security against your loan. In some cases, it is possible to borrow up to 75% of the value of the asset. Managing the loan is made easier, as repayment terms tend to be lengthy. Business owners are therefore able to concentrate on growing their businesses whilst budgeting effectively over a long period of time.
Unlike many high street banks, our alternative finance providers will not require comprehensive business plans to process your application for a secured business loan. To qualify, you must operate a UK-registered business that has been trading for at least two years. Should you have poor credit history, you may also be required to demonstrate a sustained period of growth.
If you operate a limited company or a limited liability partnership, you may be required to provide a personal guarantee alongside a company asset as security for your secured business loan. If the directors or shareholders hold a minimum 20% shareholding, they may also be required to provide a personal guarantee. Residential property or high value personal possessions are considered to be suitable personal assets.
It is worth noting that if you are offering commercial property or land as an asset, which has an existing mortgage, the lender may register a legal or equitable charge. A legal charge gives the lender the power of sale if repayments are not maintained. However, if consent is required from an existing lender, such as a mortgage provider, registering a legal charge can take time and the funds may not be made available for some weeks.
Many lenders offering secured business loans choose to register an equitable charge, as this is quicker to process and does not require the consent of the mortgage provider. The lender will not gain power of sale over the property but it does provide enough security for them to approve your loan. With an equitable charge, funds are made available within hours of approval. Should you lack the assets to qualify for a secured business loan or you do not wish to use your property as security against a loan, an unsecured business loan could offer a better solution for your needs. Alternatively, our wide range of other business finance options could provide the right funding solution for your business.