Secured business loans require collateral. In this respect, they are different from unsecured business loans, which don’t require collateral. For a first-time borrower, it might seem the latter is preferable, but let’s not jump to conclusions!
Lenders offering secured business loans secure their interest by asking you for a guarantee. This can be equipment or inventory, or something else you legally possess, depending on the type of the business you run. If, by any chance, you won’t be able to repay the loan in due time, the lender will have the right to take possession of the guarantee, thus recovering their money.
Secured loans are not as risky for borrowers as unsecured ones, especially when it comes to business loans, which are typically much higher. A secure business loan always protects the lender. And this makes the bank willing to lend you a lot of money, usually as much as you ask.
Moreover, the interest rate tends to be low, the repayment terms favourable, and the loan application process fast. All these are great advantages for a business that requires a considerable loan that exceeds £500,000. Secured loans always come with better interest rates than unsecured ones, and often this advantage alone is worth the collateral. That said, certain businesses, especially small ones, might not be willing to agree because of the risks involved. Unsecured loans are then a good alternative.
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Both secured and unsecured loans can help a business grow. For some companies, one type of loan might be preferable to the other, but it all depends on the condition of the company, and its financial strength. If you wish to borrow a lot of money quickly, and to achieve a preferable interest rate, secured business loans are the right choice for you.