Secured Business Loans
Often the amount a business can borrow is limited by what security is available to secure the advance. There are unsecured loan options available, however for many reasons unsecured borrowing is not always possible.
It is common for lenders to seek security for the following reasons;
- Trading history is patchy
- The directors have past credit issues or the company has been loss making
- The business sector has seen upheaval
- There are regulatory, legal or political risks associated with the business
- The level of borrowing has exceeded where the lender is happy to advance without security
There are other reasons but these form the most common.
For the borrower there are reasons why a secured business loan can be beneficial, these could be;
- The business is about to grow but yet to establish a track record
- Greater flexibility is needed in terms of repayment structure, interest and term of borrowing
- The lender wants you to put your cash in to the business at the same time but you would rather avoid it
- You need to refinance existing borrowing
- Credit issues mean you cannot borrow otherwise
What To Expect
Generally secured business loans require less underwriting in terms of ongoing monitoring or supporting documentation. The underwriting process is often more flexible and lenient, however you always need to be comfortable with repayments as your asset used as security is at risk otherwise.
In terms of expectation;
- An answer or outline offer of finance within 48 hours, often the same day
- Independent Legal Advice (ILA) may be a mandatory requirement to ensure you know what you are agreeing to
- A valuation of property will likely be required
- A contribution towards the lender’s legal fees is common
- The consent of any other mortgage provider who also uses the property as security will be required
- Loans from £30,000 upwards
- Direct or Third Party security so you don’t have to be the asset/ property owner
- Low set-up costs are available
- Flexible repayment options can be available
What To Consider
Always approach any commercial borrowing with an open mind. Unlike borrowing personally, commercial borrowing should be for the benefit of your business and as such the decision to borrow should be a commercial one not an emotional one.
When looking at secured borrowing consider;
- The risk to you versus the reward to your business
- What the borrowing will give you in terms of cost saving, more profits, cash flow or expansion and growth
- How you can mitigate the risks of providing security (insurance or PGI can sometimes help)
- Whether you properly understand the risk
There are always other considerations, if you are ever in doubt then always seek independent legal or professional advice.
Why Use Lime Consultancy?
We will always look at all the options even if you ask us to source secured lending for you. We work with over 200 lenders across the commercial space and as such have a better understanding of what is out there than most SMEs even can.
We don’t charge upfront fees, we don’t charge for you asking questions. We only charge on success and are not afraid to say no or advise you not to borrow where we think it is the right thing to do.
We are also full members of The NACFB and regulated by The FCA.
If you want to explore your finance options further then please call 01293 541333 or contact us direct.