Why should your business consider a secured loan?
You need funding to launch a business, no matter the size. Various types of funding are available in the UK – from asking your friends for loans to acquiring a credit card. Ample cash flow will keep your business afloat and support initial running costs. However, you also need to consider how you will keep your business running once you have launched.
In a recent survey by SME loans, a whopping 38% of businesses in the UK consistently struggle with cash flow. Over 2 million employees are not paid on time because of cash issues in their company. While personal savings and government grants can get your company started, you need another plan for long-term cash flow.
What is a secured business loan?
A secured business loan can be borrowed for around 1 to 5 years – with some lenders stretching to 30 years. You offer an asset of your company as security for your borrowings – such as property, equipment, stock, land, or vehicles. The amount you borrow will equate to the value of this asset. When sorting assets, you should always bear in mind that most lenders prefer tangible assets for secured loans and that you’ll still need to make monthly repayments on the loan once something suitable has been found. If you fail to make these repayments, the lender can seize this asset and sell it to regain their money.
How do you apply for a secured loan?
To apply for a secured business loan, you need to provide documentation about yourself, your company, the nature of your business and the asset you can offer up as collateral. You can request the amount for the loan and a realistic repayment schedule. The lender will evaluate these numbers and either approve or decline the loan. Multiple factors are taken into consideration, such as your credit, trading history and risk. You will need to meet a specific set of requirements determined by the lender – including minimum annual turnover and stable credit history.
What are the Benefits of a Secured Loan?
Secured loans have numerous benefits. The rates are fairly reasonable, and some loans offer deals from 3% APR. Rates can vary depending on the asset offered and the age of the business. However, you are likely to get a better rate on a secured loan than a non-secured loan.
You are less likely to be asked to give a personal guarantee when you are offering up an asset. You can often borrow more funding over an extended period of time to give your business the best chance of success. If you have an inconsistent history with credit, you can use assets to get a secured loan. Although, you may have to contact multiple lenders and explain your current situation if this is the case.
In Summary
A secured loan can help you access a new industry and grow your team. Lenders rarely have strict rules about how you can use the borrowed money. It’s always good to have a solid business plan in place so you can make the most out of the funding.
*This is a collaborative post.
