Are you a business owner looking for funding to help your company? Whether you need support for your start-up or want to inject capital into your existing company, a secured business loan could be an option.
If you're not sure how this option works, this blog will help you understand what it is and whether it may be able to help you.
What is a secured business loan?
It’s a funding option that allows you to borrow money for your business by using an asset, like a property, as security. Since the loan is backed by your property, it can help you get a larger loan and better interest rates, as the lender’s risk is lower.
However, if you don't keep up with repayments, your property could be repossessed. So, this option can be riskier for you.
These loans can be used for a variety of purposes, including:
- Improving cash flow;
- Consolidating business debt;
- Investing in property;
- Purchasing equipment or stock for business growth;
- Raising deposits for property purchases;
- Covering day-to-day operating costs;
- Paying off tax bills.
How do secured business loans work?
A secured business loan is essentially taking out a second mortgage on your property. In simple terms, this means you’ll have two loans secured against your property, your mortgage and the new loan.
By doing this, it means that your property serves as security for the loan. Therefore, you’ll need to make monthly payments on both loans, ensuring that you stay on track with the repayment schedules. This is essential to avoid the risk of your property being repossessed.
Can I get a secured business loan?
In theory, if you're a business owner and need funding to support your company, you may be able to get secured business finance. Lenders will assess factors, such as your personal circumstances, before deciding whether to approve your loan.
As long as you can offer suitable security and meet the lender's requirements, there’s a good chance you’ll qualify.
Can you get a business loan secured against property?
Yes, you can get a business loan secured against property. Many lenders require this type of security. You can use either your home (residential property) or an investment property, like a buy to let, as security. If you use your rental property, it’s known as a buy to let secured loan.
Whether you choose to get a business loan secured by residential property or use your rental property depends on your needs. The criteria may vary, as different lenders operate in these areas. Therefore, it is always a good idea to research your options carefully before you settle on a solution.
What is the application process?
To apply, start by deciding how much funding you need and whether you want to go directly to a lender or work with a broker. Once you’ve made that decision, reach out to discuss your needs and see if they have a suitable loan option for you.
If they find a good fit, you’ll need to collect some documents. This may include bank statements, identification, and details about your property.
Once you have your documents ready, submit your application. The lender will review your credit history, the value of your property, and the health of your business to check if you qualify.
If approved, the lender will send you a loan agreement with details about the amount, interest rate, and repayment terms. Be sure to carefully review everything before agreeing.
After you sign the agreement, the lender will release the funds. From then on, make sure to follow the repayment schedule to avoid penalties or losing your property.
Summary
In summary, a secured business loan can be an option if you're looking to raise money for your company. By offering a property as security, you may be able to access larger loan amounts and better interest rates.However, it’s important to consider the risks involved. To get started, it’s key to research your options, determine the amount you need, and gather the documents to apply.
Loans are secured against property. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Be aware that consolidating debt could extend your repayment term and increase the total amount you pay over time.
