Assuming you select a loan term you can comfortably afford, borrowing money can free up cash flow or better yet—propel your business into a new phase of growth.
But, with hundreds of loan options out there, you might be wondering: is secured finance right for me? Before you sign those papers and start snapping up new sales, be confident that secured finance is the best way forward.
If you don’t have time to do your research, or feel a headache coming on at the thought of applying for finance, simply speak to a lending expert who will do the heavy lifting on your behalf.
What is a secured business loan?
When you take out a secured business loan, you need to provide your lender with collateral, which is essentially a form of security. When taking out a business loan, you’ll typically secure it with a property. On the other hand, equipment loans use machinery or other physical assets as collateral.
The purpose of collateral is to reassure your lender that if you default (touch wood), they’ll be able to pay off your loan themselves with your asset. In other words, you’re giving your lender peace of mind with a back-up payment plan.
Why secured finance?
A secured business loan is always backed by collateral, unlike unsecured finance, where collateral is not required.
Collateral can take the form of any physical asset, provided it has significant value. An appropriate form of collateral will depend on the type of loan you’re taking out—your lender will determine the value and suitability of your asset/s before proceeding with your application.
Secured finance is offered by both banks and alternative lenders, so there are lots of options to choose from. Here’s why businesses turn to secured finance over alternative forms of lending.
1. Lower interest rates
Unsecured finance is risky for your lender, because your loan is not backed by security. On the other hand, secured finance is a more comfortable option for lenders because they have something to fall back on if you default.
Because of this, your lender can justify lending to you at a lower interest rate. That’s why many established businesses with access to collateral choose secured loans.
2. Greater borrowing power
Again, due to the dependable nature of secured finance, your lender can comfortably lend more money and offer longer terms.
Longer terms can help you build up or maintain a positive credit history, while ensuring cash flow remains stable and interest rates, low.
In addition, being able to borrow a larger sum of money makes secured loans ideal for rapidly expanding businesses or big investments, like:
- Property purchases
- Refinancing debt
- Business acquisitions
- Share buyouts
- Business expansions
3. Ideal for larger, established businesses
As mentioned, established businesses with access to collateral often take advantage of secured loans for their low interest rates and potential to fund larger business initiatives.
But, regardless of how established your business is, you should have a solid plan on how you’ll meet your repayments before signing on the dotted line.
Failing to pay off your loan can leave your business in a vulnerable position and damage your credit score, ruining your chances of securing credit in the future.
Don’t risk it—speak to a secured lending specialist today and make an informed decision, based on your unique business needs.
Mikal manages our Commercial and Development Finance team here at Valiant. He works closely with our talented lending specialists to deliver quality outcomes for clients looking to expand their business.
Related Posts
Compare interest rates from 80+ lenders, and find the best value for your business in minutes.
Find out if invoice financing is right for you.
Here’s the key criteria lenders look for when deciding whether to approve your commercial loan.
What does the future of small business look like? Click for our thoughts on recent RBA findings.
Has the pandemic made it harder for SMEs to get a loan? Click to find out.
Find out how lenders assess your eligibility for unsecured finance based on the documentation you give them.
Valiant has partnered with Qantas Business Rewards to offer members a streamlined solution to finding the right business finance. Here's how it works.
Wondering if a merchant cash advance is a good idea? Click to find out how it works, how much you can expect to pay and whether it’s right for you.
Which factors determine your unsecured finance interest rate? Click to find out.
No time for lengthy finance applications? Unsecured finance cuts through most of the red tape—here’s what you need to know before you apply.
Secured loans require assets for security, but which assets make the cut? Click to find out.
You’ve decided: it’s time to grow your business. There’s one last call to make. Secured or unsecured finance?
Grow your business with a little help from your future sales. Find out more about merchant cash advances, a unique form of business finance.
Refinancing could help you lock in a lower interest rate, on better terms. But should you do it? Here’s everything you need to know before sealing the deal.
Check out the top six questions about Coronavirus we had from clients last week. Here's how Covid could impact your ability to get a loan.
Your chances of getting approved for unsecured business finance depends on these 12 factors. Click to learn more.
Click here to learn about your franchise finance options, and compare loans from 80+ Aussie lenders.
Choose wisely with these 7 green flags to look out for.
Time is money. That’s why you should think twice about which bank to go with for your business loan. Or whether you should go to a bank at all...
Denied business finance? What now? Here’s why Aussie business owners are turning to non-traditional lending solutions, and succeeding.
Take advantage of lower interest rates and greater borrowing power with secured business finance. Click to learn more.
A line of credit can take a huge load off your shoulders as a business owner. Click to learn why.
Click to find out whether a secured or unsecured loan suits your business best, and easily compare finance solutions with competitive rates.
Find out whether an unsecured business loan is right for your business, and compare loans from 80+ lenders.
Need cash but don’t have collateral? An unsecured business loan might be your answer. Click here to learn more and make your best business move yet.
Click here to find out which type of commercial finance is right for you, and contact a product specialist to get funding, fast.
Valiant Finance are pleased to announce that we have secured $12.5 million in our Series B equity funding.
Don't get caught out. Here's your Business Loan Checklist to put you in the best position to find funding for your business.
Your guide to applying for an unsecured business loan and helping your business grow.
Put your best foot forward by preparing strong answers to these 4 questions.
A little preparation goes a long way. Get ahead on the finance front with our quick tips to help you with the 3 key areas of your loan application.
Want to reach your customers online? Are you ready to digitise your small business? First up: get smart about social.
Every business is unique. Every business loan is different. What features are most important to you? Consider these 4 things before applying for finance.
Don't get caught out. Here are 5 hidden fees and charges that could apply to your small business loan.
You've explored your business finance options. What do you do next? How can you be sure you're comparing loans effectively and getting the best deal?
Are unpaid invoices causing cashflow problems for your small business? Invoice financing may be the answer.
You're applying for loans, you start getting positive responses, and suddenly you're asked for a guarantee. Don't sign until you read this!
Are you invoicing your B2B customers with longer payment terms? Is it hurting your cash flow? Debtor finance could be a lifesaver between payments.
With so many business finance options to choose from, how do you know whether working capital is right for your business? Start by reading this.
2018 is your year. Here are 7 quick tips and tricks to get back in the driver's seat when it comes to battling business debt.
Are you ready to refinance? Reviewing your business loan every 2 - 3 years can save your SME a lot of money. Here's what you need to know.
Improve your chances of locking down the perfect business loan. Here are 19 business funding mistakes to avoid when you're applying for commercial finance.
Getting the best rate is all about asking the right questions. Have you done your research? Here's where to start and why.
Need to raise cash for your business? We explore the use of debt versus equity, and how to decide which one is best for your business.