Compare secured business loans

Secured business loans require you to secure your borrowing against an asset. Find out if they could work for you.

If you’re looking for funding for your business, a secured business loan might be an option you’ve thought about exploring. Secured business loans can enable you to borrow a larger lump sum than many alternatives, but there are also risks involved, as we explain.

Name Product Finder Score Loan type Loan amounts Loan terms Turnover/trading criteria Key benefit
Barclays Secured and Unsecured Business Loans
4.5
★★★★★
Fixed or variable rate loans
From £1,000
12 to 240 months
No specified minimum turnover or time trading
Subject to application, financial circumstances and borrowing history. Other terms may be available.
Funding Options Secured Loan
4.5
★★★★★
Fixed rate Secured loan
£1,000 to £20,000,000
1 to 360
No specified minimum turnover or time trading
NatWest Fixed and Variable Rate Business Loan
4.5
★★★★★
Fixed or variable rate loan
£25,001 to £10,000,000
3 to 300 months
No specified minimum turnover or time trading
Subject to status, business use only.
Funding Circle Asset Finance
4.0
★★★★★
Peer-to-peer Asset finance loan
Up to £5,000,000
6 months to 5 years
£50,000 minimum turnover,
no specified minimum time trading
Lloyds Bank Larger Business Loans
2.5
★★★★★
Fixed or variable rate loan
From £25,001
12 to 300 months
No specified minimum turnover or time trading
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What is a secured loan?

A secured business loan is a type of financing that requires you to use business assets as security. Assets used often include commercial property, vehicles, land or machinery.

Using an asset as security reduces the risk for the lender as it’s less likely to lose money. Because of this effective guarantee, you can often borrow a larger sum of money over a longer period of time – known as the ‘term’. You’re also likely to be offered a better interest rate compared to an unsecured business loan.

However, it also means that if you are unable to keep up with your repayments, the lender has the right to claim ownership of the assets and sell them to recoup its money.

How do secured loans work?

Secured loans work in a similar way to most other types of loan. You typically borrow a lump sum of cash that you then repay in monthly instalments over a set term, with interest added on top. Secured loans can have either a variable rate of interest or a fixed rate.

Variable rates mean that your interest rate can move up or down in line with movements in the Bank of England base rate. Fixed rates, on the other hand, stay the same for the duration of the loan. Fixed repayments can make it easier to budget.

The amount you can borrow through a secured loan will depend on the value of the assets you’re using as security as well as your business finances.

Types of secured business loans

As well as standard secured business loans, there are other types of secured lending. These include:

Asset finance

This enables you to secure the use of assets such as equipment, machinery and vehicles, without paying for them upfront. The two most common forms of asset finance are hire purchase and lease financing.

Hire purchase lets you lease the item over a set term in return for fixed payments and a deposit. At the end of the term you own the item outright. With lease financing, the lender buys the item and then you rent it back for a fixed monthly fee. At the end of the term, you might be able to continue renting, buy the item for an agreed price, or return it.

Asset finance

Revenue based loans

With revenue based financing, you receive a lump sum in exchange for a percentage of your future revenue. You usually repay the loan in monthly instalments, but the amount you pay each month will be linked to how well your business is doing. You pay more in months where business is booming, and less during months when sales have tailed off.

Revenue based financing

Invoice financing

Invoice financing is a way of borrowing money based on what customers owe you. Instead of waiting for invoices to be paid, a third party advances you a large percentage of the invoice value upfront, often up to 95%.

The invoices act as collateral and when they are due, the third party collects the money from the customer and then pays you the remaining balance minus fees and charges.

Invoice financing

Peer to peer lending

Peer-to-peer lending cuts out the middleman (i.e. the bank) and enables you to get a loan from other individuals or businesses. The idea is that it matches people who want to borrow money with those who want to lend it. Interest rates tend to be more competitive for borrowers, while lenders also get better rates than they would with a traditional savings account.

Although many peer-to-peer lending platforms offer unsecured loans, some also offer secured loans, whereby you’ll be asked to use an asset as security.

Peer-to-peer lending

Who offers secured loans?

Some high street banks will offer secured business loans, but you’re likely to have better luck with a specialist lender, many of which can be found online.

Make sure you shop around and compare lenders carefully to check you’re getting the best deal for your business.

How to compare secured business loans

When comparing secured business loans, it’s a good idea to keep the following points in mind:

  • Minimum and maximum borrowing amounts. Check how much each lender is likely to let you borrow to see if it meets your requirements.
  • The interest rate. Rates will vary depending on the lender and ideally you want to find the lowest rate possible. Remember to check whether the rate is fixed or variable.
  • The repayment term. Also check how long you’ll have to repay your loan. Longer loan terms mean your monthly repayments will be lower, but you’ll also pay more in interest overall.
  • Eligibility criteria. It’s also important to check the eligibility requirements to make sure you qualify before you apply. Some lenders might require a personal guarantee which means you’ll need to provide personal assets, such as your home, as additional security for the lender.
  • Fees. Check whether there are any arrangement fees, valuation fees or early repayment charges and how much these are.

Pros and cons of secured loans

Pros

  • Interest rates are often lower compared to unsecured lending
  • You can usually borrow a larger sum of money compared to unsecured loans – the exact amount will depend on the value of the assets used as security
  • You can repay your loan over a longer period of time which means your monthly repayments will be lower
  • You might still qualify even if you have a limited trading history and credit history

Cons

  • You’ll need to have suitable high value assets to use as security, so it won’t suit all businesses
  • If you can’t repay your loan, the lender can sell your assets to get its money back
  • Longer repayment terms can make it more expensive overall
  • It can take longer to arrange a secured loan as assets will need to be valued

What are the risks of secured business loans?

The main risk of a secured business loan is that you could lose the assets you’ve put up as security. If you are unable to keep up with your loan repayments, the lender has the right to claim ownership of your assets and sell them to recoup the cost of the loan.

What’s more, if you’ve also offered a personal guarantee and used personal assets such as your own home as additional security, these could be at risk if you cannot repay the debt. A personal guarantee means you will become personally liable for repaying the loan if your business can’t.

If you’re worried about missing repayments, talk to your lender as soon as possible.

Who is eligible?

Eligibility requirements for a secured business loan are often more relaxed compared to unsecured loans. However, exact criteria will depend on the lender. Your business will usually need to have been trading for at least three months and be registered in the UK.

Your business credit history will also be looked at, but if you have poor credit, that doesn’t necessarily mean you’ll get turned away. Instead, lenders are more likely to focus on the value of the assets you’re using as security and what you plan to use the loan for. The higher the value of the assets, the greater the chance of being accepted. However, you will still need to be able to demonstrate you can afford to repay the loan.

Repaying a secured loan?

You repay a secured business loan in monthly instalments over the agreed term. Each month you’ll pay back a portion of the amount borrowed, plus interest. If your loan has a fixed interest rate, your interest payments will remain the same for the term of the loan.

Some secured loans will allow you to make overpayments without incurring a penalty fee – however, the amount you can overpay by might be restricted to say 10% of your outstanding loan balance. If you pay off more than this, you might have to pay an early repayment fee so check the small print carefully.

Alternative types of business funding

Secured loans are just one option when it comes to borrowing money for your business. You could also consider the following:

  • An unsecured business loan . You won’t be required to use assets as security, making it the less risky option. But it does mean you won’t usually be able to borrow as much and interest rates can be higher than with secured loans.
  • A business credit card This will give you a flexible line of credit that you can draw on as and when required. You then pay back the amount borrowed in flexible monthly repayments. Some credit cards also offer perks for your business, but bear in mind that interest rates can be high if you don’t clear the balance each month. You also won’t be able to borrow as much as you can with a loan.
  • A business overdraft. If you have a business bank account, you might be offered an overdraft with it. This can be useful if you only need to borrow funds from time to time as you can dip into it as required. This should only be used for short-term borrowing though as interest rates can be high.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.

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