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What are secured business loans?
Secured business loans are higher-value business loans that require a borrower to offer something as ‘security’, usually a company asset such as property, land or equipment. This means the loan is ‘secured’ against one, or more, of these assets, which the lender can take if a business stops making repayments.
Secured business loans differ to unsecured business loans, which don’t require any security. Businesses can generally borrow more with a secured business loan, with some lenders offering up to and above £1 million on a secured basis.
Because lenders have a better chance of recovering money if it’s secured against a valuable company asset, they tend to regard secured business loans as less risky than unsecured business loans. As a result, lenders can be more flexible with their terms, giving borrowers competitive interest rates and long repayment terms of anything between two and ten years.
Typical uses for a secured business loan include funding the purchase of commercial property, financing a major office refurbishment, and covering the cost of new machinery, all of which can require significant amounts of capital.
Company collateral as security
Not all lenders ask for the same thing as security on a secured business loan, but you should expect to pledge assets such as the following:
- Commercial property
- Land
- Vehicles
- Equipment
- Fittings and fixtures
- Or, instead of individual assets, some lenders request the net worth of all assets
It's important to bear in mind that the value of your assets must be sufficient for a lender to justify giving you the loan.
Equitable and legal charges
When a loan is secured against property, a lender will register one of two charges on the property: a legal charge or an equitable charge. The type of charge that is registered will generally depend on whether the property owner is restricted from making a disposition without the consent of the existing lender, typically a mortgage provider.
If there is no such restriction in place, a lender might look to register a legal charge, which grants it the power of sale if a borrower's payments are not maintained. However, if there is already a legal charge on the property, a lender will need to secure the consent of the existing lender. This can leave you, the borrower, waiting weeks for funds to become available.
For this reason, some lenders will instead register an equitable charge, which doesn't require the existing lender's consent. While it doesn't give the lender power of sale over the property, it does provide them with some security, and means that your business can be funded within hours of approval, rather than weeks.
Personal guarantees
As well as providing company collateral, you may be asked to give a personal guarantee as additional assurance for the lender. This means making other individuals liable for the loan, whether that's a company director or somebody outside of the business. Lenders’ requirements vary, but often depend on your company status, as outlined below.
Limited companies and LLPs
- If your business is a limited company or limited liability partnership (LLP), the majority of lenders will expect you to provide a personal guarantee alongside company collateral.
- Directors or shareholders with a minimum of around 20% to 25% share in a limited company are also likely to be asked to provide a personal guarantee.
Sole traders and partnerships
- When it comes to sole traders and partnerships with unlimited liability (not LLPs), you’re always personally liable, and, as a result, you won’t be asked to put up any company collateral.
Since each lender has a different approach to decision-making, it's worth looking closely at every lenders’ terms. Consider, however, that if you refuse to provide a personal guarantee, this could reflect badly on your application and intention to pay back the money.
So, regardless of whether you’re a sole trader, partnership, limited company or LLP, be prepared to provide a guarantee such as residential property or valuables such as jewellery.
Secured business loans from Fleximize
Fleximize's secured business loans are a great funding solution for fast-growing SMEs, and can be used to finance anything from new equipment to an office refurbishment. They're also a great alternative to bridging loans for property developers or businesses that are looking to purchase new commercial property.
Our loans come packed with a range of flexible features, including top-ups and repayment holidays. The key details of our secured business loans are as follows:
- Borrow £5,000 to £500,000 over one month to 48 months
- Competitive interest rates starting from 1.5% per month
- Approval within 48 hours of submitting a full application
- Loans secured via equitable charge, meaning funds can be deposited within hours of approval
- Industry-leading flexibility, including top-ups and repayment holidays
- No exit fees or early repayment charges
One of Fleximize's relationship managers will guide you through the whole application process, and ensure that your funding package is tailored to the unique requirements of your business.
We don't apply the strict lending criteria of banks, which means we will consider applications from businesses with a less than perfect credit history. If you can demonstrate how you've turned around an inconsistent track record of repaying debt, and have evidence of sustained revenue growth, you might be eligible for a secured business loan from Fleximize.
On the other hand, if you're a startup or new business, you might not have the assets to put up for a secured business loan. If this is the case, an unsecured business loan might suit you better.
Apply for a secured business loan with Fleximize
Taking out a loan is a significant financial commitment for any business, so it's essential to have all of the information you need before applying.
Our team will happily talk you through the ins and outs of our secured business loans, so feel free to give us a call on 0207 1000 110. Alternatively, if you're ready to apply, simply click the button below.