What Is A Secured Business Loan?
A secured term loan is a common way of securing finance for your business. Secured term loans are loans provided for a fixed time period that are ‘secured’ by a physical asset that is owned by the business or one of the directors and has an assessable value. This asset is often referred to as ‘collateral’ or ‘security’. Common forms of collateral used for secured term loans include residential property, commercial property, vehicles, machinery or other equipment.
Pledging an asset as collateral for a secured term loan means that the lender can take possession of the asset if you cannot meet your agreed repayments and default on the loan. The key feature of a secured loan is that it is backed by collateral as part of the lending agreement. Lenders will charge a lower interest rate and provide the facility for a longer time relative to other business loan products as secured term loans are inherently less risky as the lender has a relatively clear way to recover any potential losses by taking possession of the asset.