Secured Business Loans

Secured Business Loans

As a commercial finance provider dedicated to helping SMEs reach their growth potential, we know just how vital secured business loans are for enabling businesses across all industries to succeed in achieving their strategic goals.

A secured business loan can open your business up to a whole new level of funding. It also allows you to pursue any number of avenues in your strategic development, be it expansion, acquisition or simply bolstering cash flow – all by “unlocking” cash tied up within your business. However, because of the collateral asset requirements behind any secured loan, it’s a process you need to approach in a careful and considered manner.

We provide secured loans for small businesses that have the credibility, expertise, and credit capabilities of a traditional bank behind them, while offering the speed, flexibility, and manageability of an alternative lender. If you think a secured business loan could be the next logical step for your business, read on to find out about the benefits and the process behind secured funding, as well as an analysis on whether it’s the right move for you.

What is a secured business loan?

A secured small business loan requires you, the borrower, to provide assets as security or collateral to us, the lender, in the instance that the loan cannot be repaid. Secured business loans in the UK tend to be larger sums of money borrowed against an asset you own, such as your home.

Secured loans differ from unsecured business loans based on the collateral involved. Unsecured business loans require no collateral assets as security, while secured business loans do. The benefit of secured business loans for start-ups and SMEs lies in the significantly increased funding amounts they offer to borrowers, as well as lower interest rates and credit requirements than unsecured loans.

Below, you’ll find a pros and cons run down on secured loans and a more detailed comparison with unsecured funding options, but in summary, secured business loans offer cheaper and higher borrowing potential for businesses. However, this is coupled with an increased risk profile for the borrower.

What types of collateral can be used as part of secured business loan requirements?

There are four major groups of assets, defined as either fixed or floating assets, that can be used as collateral in a secured loan:

  • Property and land
  • Plant and machinery
  • Stock
  • Unpaid accounts receivable

Business loans secured against property or land are considering to be fixed asset securities, while those secured against stock, equipment, or unpaid invoices are based on floating assets.

What are secured business loans used for?

Because of the increased funding ceiling that comes with a secured loan (we’ll offer anywhere from £100,000 to £50 million in funding, depending on your circumstances and proposal), the strategic possibilities for a business are extensive. A large secured business loan is typically used for:

  • Acquisitions
  • Succession planning
  • Growth
  • Boosting cash flow
  • Turnaround strategy funding

As well as the additional financial capacity they offer, secured business loans are used by businesses who can’t get approval for unsecured funding (perhaps due to not having a good enough credit profile or long enough operational history), but do have suitable assets to use as collateral.

In these instances, secured business loans can provide the complementary benefit of helping the business that’s taking out the loan to build its credit profile through honouring the repayment agreement.

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What are the pros and cons of secured business loans?

Secured business loans in the UK are extremely popular across all industries, thanks to their broad accessibility and funding potential. These credentials, in turn, provide a host of benefits to the businesses that are accessing the loan. Every loan comes with a level of risk, however, and any potential applicant should carefully consider those risk factors alongside the benefits.

The benefits of a secured business loan

  • Larger funding amounts: In exchange for assets placed as security, secured loans allow lenders to offer considerably higher loan amounts to the borrower. With Nucleus, for example, we offer secured loans of up to £50 million, while our unsecured loan amounts are capped at £250,000.
  • Lower interest rates: With collateral assets agreed upon, the risk profile of the loan is minimised for the lender, which usually means secured business loan interest rates are lower for the borrower than with unsecured alternatives, and a “cheaper” loan in principle.
  • Longer repayment terms: We offer repayment terms of up to seven years on secured small business loans for our clients. This allows for manageable repayments for the business that’s taken out the loan, creating financial freedom and stability to focus on their growth plans.
  • Accessibility for bad credit ratings: Businesses with poor or limited credit profiles (for example, start-ups with no trading history) will find it difficult to access unsecured funding. Business loans secured against assets, however, are available to virtually any business with the suitable fixed or floating collateral to its name.

The limiting factors and risks of secured business loans

  • Business loan security requirements: You cannot get a secured business loan without owning assets that can act as collateral. Not every business has such assets, likewise not every business wants to put key assets forward as security. In these cases, an unsecured business loan becomes a more suitable and achievable option.
  • Higher risk: If you fail to make repayments on time or default on your loan, the assets you’ve offered as security could be seized and sold off.
  • Credit risk: Just as timely repayments can help your credit score, late payments and defaults can negatively affect it. It’s also worth noting that applications for secured credit come up as hard checks on your credit profile, meaning you should be fully prepared before heading into any secured loan application.

Secured vs unsecured business loan: which is right for you?

So, should your business loan be secured or unsecured? If you request a call back from us, one of the first things we’ll do is get a proper understanding of your business in order to offer advice and consultation one way or the other. However, there are a few general pointers that can help make sense or the secured vs unsecured debate for your business.

A secured business loan is probably best for you if…

  • You want access to higher loan amounts.
  • You want lower interest rates or extended repayment terms.
  • You don’t have suitable credit history to get an unsecured business loan.

An unsecured business loan is probably best for you if…

  • You don’t have the assets to apply for a secured loan, or you don’t want to put up assets against a loan.
  • You want quick access to lower amounts of finance.
  • You have a good credit history and can secure the amount of funding you need without the need for collateral assets.

How to get a secured business loan with Nucleus

We’re one of the UK’s leading secured business loan providers, offering flexible and fast secured business loans online to start-ups and SMEs from a full spectrum of industries. We have a focus on creating long-term relationships with our clients that are based on a true understanding of their business, which is why our secured loan application process follows an in depth, face-to-face, and onsite appraisal.

To find out more about our secured business loans, take a look at the different types of funding we provide for our clients, or get in touch with us to talk about next steps.

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