• November 17, 2022
  • Adrina Martinez

If you want to use the assets of your business as collateral for a loan, which is what many people do, you might need a secured business loan. If you can't pay back the money you borrowed with this type of commercial loan, the lender will get their money back by selling the assets you put up as collateral.

The maximum amount a person can borrow is based on the value of the assets used as security for the loan. Loans can be backed by a lot of different things, such as cars, pieces of equipment and machinery, real estate, and land.

In this article, we'll talk about business loans that need collateral. We will also talk about the types of collateral that can be used and the fees usually associated with this type of financing.

What is a Secured Business Loan?

A secured business loan is one that is backed by some kind of asset, like real estate, equipment, or other property. This valuable item, which the lender could sell to make up for their losses if the borrower doesn't pay back the loan, lowers the risk for banks or private money lenders in the UK and is collateral.

Here are the statistics on increases in the secured loan market through 2022:

The Finance & Leasing Association (FLA) reports that 30,849 new agreements were made in the 12 months to June 2022, a 52% increase from the previous year. This growing trend continued in June 2022, with 2,854 new agreements.

Although this increase is slightly below previous months, it's still a 29% change from the prior year and shows that borrowers still want this funding choice.

How Do Secured Business Loans Work?

A typical process is used to apply for a secured business loan. The people who want to borrow money fill out an application in which they list their most important needs:

  • How much was borrowed?
  • How long will the loan be?
  • What kind of security will be put up for it?

After that, the lending institution will look at the borrower's credit score and the value of the asset. Also, the borrower's reliability in figuring out the level of risk. They will make an offer if all of the conditions have been satisfied.

How to Get a Secured Business Loan?

To get a secured business loan, the process for applying for a loan is standard. Potential borrowers fill out a loan application and list the following requirements:


Aside from the amount of business you do and your credit history, the most critical factor in whether or not you will get a secured loan is whether or not you have valuable assets.

If the company is too small or too new to have its own, the directors may have to sign a contract that puts their assets on the line as a personal guarantee. This is done in case the company doesn't already have one.


It goes without saying that every creditor has its own requirements. But a good amount of monthly turnover is the first thing every creditor will look for.

Lenders will give you money because that's how they run their businesses. But they need to be sure that you'll be able to pay it back, and they get that confidence from how much money you make.

Credit Score

Checking a potential borrower's credit score has become common in the financial lending industry. It gives immediate information about how reliable the potential customer is with money. It's important to know that lenders will check both the personal credit scores of individuals and the business credit scores as part of their research.

Even though there is a clear legal difference between personal and business financing, banks still want to know the risks before they lend money. They will be more careful if a personal credit score is brought up. Even with poor credit scores, you can still apply for loans such as bad credit business money loans in the UK or instant business loans against collateral.

What Can You  Use as a Loan 'Collateral'?

Lenders will almost always choose hard assets like cash and buildings. And land over soft assets like intellectual property because hard assets offer a higher level of security.

Examples of Different Types of Collateral You Could Use:

  • Buildings
  • Land
  • Money
  • Stock
  • Business Equipment or Machinery

What Are The Advantages Of Getting A Secured Business Loan?

  • It will be possible for you to borrow additional money if you have something that you can put up as collateral for the loan.
  • Most of the time, the interest rates for secured loans are lower than those for unsecured loans, which carry a higher level of risk.
  • If a commercial asset backs the loan, the directors don't have to give their personal guarantees.
  • Since the borrower has an asset, the lender doesn't have to look at the borrower's credit score or income as closely, but it still will.

What Are The Disadvantages Of Getting A Secured Business Loan?

  • If you are unable to pay back the loan, the security you put up could be at risk.
  • Guaranteed loans take more time to get than other kinds of financing.
  • If you don't have something valuable enough to put up as collateral for a loan, you won't be able to use this way to get money.

Securing a Business Loan with a Personal Guarantee

Even if the company doesn't have any assets to use as security for a loan, getting money for the business may still be possible by giving a personal guarantee. These papers provide a company member, usually a director, permission to use a personal asset, like a house, as a loan guarantee for the company.

Putting your name on something like this can help you get financing. But it is also risky because if the company goes out of business, it could put your family home at risk.


A secured business loan may be a good choice if you own a business and are looking for ways to fund it. Secured loans have collateral to back them up if the borrower can't repay them. Getting this kind of loan might be easy if you have excellent credit. But it might have better interest rates and terms for paying it back than an unsecured loan. Before applying for secured loans, such as loans with no guarantor needed or business loans, ensure you know how to get one and what kinds of collateral are required.

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