Compare secured business loans

Secured business loans require collateral

A secured business loan requires you put up some type of collateral against your loan should you default. Collateral can be a piece of property, equipment for your business or any other valuable asset, either personal or commercial. Providing collateral means you may have access to lower interest rates and higher loan amounts than with an unsecured loan.

However, if you fail to make your loan payments on time, the lender has the right to seize your asset to cover your remaining debt and any other accumulated expenses since default.

Here’s the difference between secured and unsecured business loans

Secured loans mean less risk for the lender

Less risk for the lender typically means a better deal for you: You'll have access to larger loan amounts and lower interest rates. This is a great choice for established businesses with reliable cash flow to make regular payments.

Any item of value can be used for collateral

The assets most commonly used to secure a business loan are commercial and residential property. Depending on the lender and the amount you want to borrow, you may be able to use the following assets as security:

• Business inventory
• Business equipment
• Future invoices
• Personal vehicles
• Commercial vehicles
• Fine art and jewelry
• Personal savings

If you don’t have any of these assets and don’t own your property outright, you still could use your property as collateral. You don’t necessarily need to own it to offer it as security. Access the equity you have in your personal or business property to get the funding you need with business equity loans.

If you don't have any assets at all, you might need to consider an unsecured business loan. Unsecured loans don’t require collateral but tend to have stricter eligibility criteria.

How much collateral is needed for a business loan?

Your lender can repossess your asset if you default on payment

Defaulting on payment could have serious consequences for the future of your business, especially if you used property as collateral. Even worse, if you listed a personal asset as collateral, you’ll lose more than an important part of your business.

As with any other loan type, you should always be wary of borrowing more than you can afford to repay. Be aware of how much regular payments are and the total cost of the loan once it’s fully paid off before you sign on the dotted line.

Collateral and a strong repayment history are in your favor

Businesses that can provide collateral and have a history of repaying its debts will likely qualify for a secured loan, however you can set yours apart with these strong points:

• Business history of at least six months in operation — or up to two years in some cases — are what most lenders require for most businesses.
• Business financial strength like your business’ profit and loss statements, average monthly turnover and income projections are what lenders will use to determine if you can make your repayments.
• Appropriate asset to provide security for the amount you wish to borrow. The asset you choose should be high-value — such as vehicles, art or jewelry. If you want to sell the asset used to secure your loan during the loan term, you must first get your lender's approval and replace it with another asset.

Bottom line

A secured loan can be great for a business looking to expand or a new business wanting to buy property or expensive equipment. Although it comes with a certain amount of risk should your business default, the low rates and higher loan amounts make secured business loans a strong option for companies of all sizes. Compare more business loan options to find a lender that suits your business needs.