Is a Secured Loan right for your business?Published on 3rd November 2017 2017-11-03T12:33:49+00:00 - Last update on 8th January 2019 2019-01-08T15:26:48+00:00
All too often cash is a precious commodity that many UK based SMEs lack in sufficient quantities, affecting your growth and sustainability. If your business has been trading for more than 2 years and contains valuable assets such as equipment or property, a Secured Loan could provide your business with a large lump sum. But, in order to make full use of the product available, you need to understand the key aspects of how Secured Business Finance works, including:
- The range of products on offer
- The size of the sum you could apply for
- What constraints there are on the loan
- Interest rates
- Criteria for applying
What types of Secured Loan are available?
The term Secured Loan covers a wide range of highly-specialised business finance products that each operate in their own unique way and are intended to target specific areas of your business. The term Secured Loans covers products such as Secured Business Loans, Bridging Loans, Invoice Finance and Asset Refinance. The result is a package that enables you to invest large sums into any area of your business and underpins its long-term sustainability, providing you’re able to pledge assets, such as valuable equipment or property, against the debt.
How much can I borrow?
Secured Loans are often considered as a means of gaining access to larger sums of money, compared with other forms of funding. However, this amount does vary between products. So you should also calculate a reasonably accurate estimate of how much funding is necessary to ensure the viability of your aims, giving you an early indication as to which product is right for your business. For example, a traditional secured business loan could allow you to borrow anything in the range of £5,000 to £1,000,000 in exchange for Fixed Monthly Repayments plus interest.
How can I use the funds?
How you choose to use the funds is entirely up to you. Each product, whether it be a secured business loan or an Invoice Finance solution, generates the cash your business requires in different ways. But, once you have the funds, you choose which areas of your business to use them in, from refurbishments and renovations to equipment or property purchases, or even a simple capital injection. So, no matter which product you choose, how you use the funds is for you to decide.
What is the cost of finance?
To many business owners, Secured business finance solutions are considered a less costly alternative to Unsecured Loans. The reason being that lenders tend to charge a smaller rate of interest, mainly because you’re required to present valuable assets such as equipment or property as collateral, reducing the amount of risk they’re accepting. Also, most secured products typically charge interest using an Annual Percentage Rate (APR) and often have a range of interest rates on offer. To determine how much interest your business is required to pay, lenders use your business’ credit score. So, the weaker your score, the more interest is applied, and vice versa.
Will my Credit Profile affect my application?
Although you will be asked to present your credit score and business history, having a less-than-perfect credit profile typically isn’t used against you. Lenders are primarily interested in whether your business has sufficient equity contained in your business’ assets to back up the debt. However, the quality of your credit profile may affect the rate of interest that you’re offered.
Looking for a Secured Business Finance solution?
Looking for a secured alternative finance solution for your business can be a long and tedious process. With the number of products on offer, you can be left feeling like you’re going round in circles when all you want is a solution that works for your business. But knowing which product to choose and who to apply with isn’t as simple as it sounds. If your business contains valuable assets that you’re able to put up as security, you can apply for a Secured Business Finance agreement or find out more with Rangewell.
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