Secured Business Loans

With secured business loans, the borrower backs up the funding with some form of collateral. The collateral can be practically any kind of asset- from “hard” assets, such as real estate, equipment, or income, to “soft” assets, such as software or patents. By offering collateral, the lender is assured that if payments are not met, there will be something to seize and sell in order to recover the losses.

Because collateral reduces the risk of default that is inherent to most loans, banks and commercial lenders are encouraged to make these loans more attractive to a prospective borrower. Secured business loans tend to have better interest rates, longer repayment periods, and they can be taken out for greater amounts of money.

Moreover, when a loan is backed up by collateral, lenders are less concerned about the borrower’s credit history. This could be welcome news to those who are suffering from bad credit.

To see if a secured business loan would be appropriate for your business, here are some of its pros and cons:

Pros

  • Better interest rates
  • Relatively long repayment period
  • Can request large funding amounts depending on the collateral offered
  • Credit history is not as important for approval

Cons

  • Needs a significant amount of collateral
  • You risk loosing your assets if payments cannot be met