What is a Secured Business Loan ?
Secured business loans are types of business loans that require upfront collateral to help with lowering the risk on behalf of the business loan company. Some examples of collateral for secured business loans could be- mutual funds, buildings, property, equipments and machinery, vehicles, stocks and bonds, …. The collateral can best be described as security as the essential aspect of these types of business loans as it lowers the risk for the business loan lender. In essence, the bank or business loan company feels more secure if the borrower defaults on their business loan, as it can re-coop the losses by claiming the collateral leveraged against business loans.
Benefits of secured business loans
1. Less stringent requirements compared to bank business loans
2. Can be given to those with poor credit scores
For those with a poor credit score, business lending institutions are likely to give higher amounts if the business loan is secured. In addition, they might offer lower APRs (annual percentage rates) on a secured business loan to borrowers with bad credit.
This can be a great option especially if you’re looking to establish a new business or looking to expand your existing business, but are recovering from poor credit rating. When issuing the business loan, the bank will overlook your credit score and use collateral to secure the business funding. Apart from a lower APR rate, you might also enjoy a much longer repayment period.
3. Easy to apply
Unlike unsecured business loans, it is typically easy to apply for these secured business loans. You can apply in person by going to the bank or any other financial lending institution or even apply online. You might even consider applying to your bank as they are highly likely to lend you money due to the fact that you’re an existing customer .Be sure to compare different APR rates and terms of a business loan program before deciding to apply for a secured business loan from one specific institution.