Secured Small Business Loans
If you want to own your own small business, I would hazard a guess that finding suitable funding will be the item at the top of your to-do list. Luckily, there are various lenders who offer secured small business loans to help you get up and running. You should be aware that there are basically two types of loans available to businesses – secured and unsecured, although a secured loan is likely to offer you far more flexibility.
It must be said that obtaining a business loan can often be the difference between success and failure for a small business, so finding the right type of loan for your business venture is of the utmost importance. There are many reasons why you may wish to get a secured small business loan and these include:
- You are looking to improve cash flow in order to give your business more stability
- You wish to purchase new equipment
- You are looking to expand your business
- You wish to market or advertise your business
- You are looking to make improvements to your business premises or perhaps even purchase a new building altogether
- You require emergency funding
A secured small business loan will typically require some form of collateral, which will usually be your business, business equipment, or an investment or residential property. Most lenders will offer differing terms, although you can generally borrow anywhere from $10,000 up to $1,000,000. You will also find that the vast majority of lenders will allow you to use the funds for just about any business purpose, but with that being said, some lenders will only lend money for specific purposes. This may include for vital acquisitions, working capital or real estate.
The loan offered can be either a fixed or adjustable-rate and repayment terms can vary from 5 years up to 30 years. This, once again, will very much depend on the purpose of the loan, and of course the specific lender that you decide to approach. The longer you look to take a secured loan over, the more interest you can expect to pay overall. And by choosing a fixed-rate loan you have the opportunity to budget for your loan payments on a monthly basis, whereas an adjustable-rate loan may initially offer a lower payment, but this will change whenever your loan rate does.
Possibly the biggest advantage of taking out a secured small business loan, as opposed to unsecured, is that it should allow you the opportunity to borrow more money and at far more favorable terms and interest rates. A lender will always assess the potential risk of any loan, whether for consumer or business purposes, however, if you are willing to offer some form of security to the lender, at least you are essentially sharing this risk.
With that said, if you were to default on your loan payment, you can expect to lose the collateral or security you have offered. This may mean that you lose your business, home, or any other form of security offered in exchange for a loan. Therefore, it is extremely important when looking for a secured small business loan that you are certain the monthly payments are affordable and will not stretch you financially.
As you are likely to be offered the best interest rates for a secured small business loan, this is the ideal opportunity for you to shop around. A lender is well protected with a secured loan, and this offers them little or no risk to lend you money. I would suggest that you speak to at least 3 or 4 lenders when looking for a secured small business loan, and go with the lender who offers the best overall deal.
You should also be a little wary as to the value of the collateral that you are offering. If, for example, you are offering your home as security for a business loan, you will need to ensure that you do not become “over-secured”. This is where you offer a far larger financial asset than the amount of the loan you are trying to obtain. Your best course of action here is to discuss this scenario with your lender and try and come to a mutually beneficial agreement. As long as you are offering some form of security you should find that most lenders are extremely forthcoming.
