Questions to ask when thinking about Secured Loans
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Sourcing the right finance solutions for your business can be a delicate matter. Although Secured Loans have been a staple of the finance landscape for a long time, many business owners are still unaware of what’s on offer, let alone how each product works. Just some of the Secured products and packages available to SMEs include Secured Business Loans, Invoice Finance and Asset Finance, to name a few. You need a suitable understanding of each secured product, as how can you strike a deal that’s right for your business if you don’t know what to ask? If you feel like you’re on the back foot, here are just some of the questions to you need to ask when considering a Secured Loan for your business.
Can I review a draft contract?
If the lender you’re approaching has one available, then yes. Asking to review a draft contract is certainly a wise move since it gives you an early indication of what to expect. You should also take the opportunity to make notes of any terms and conditions you may have concerns about with your business accountant. By entering negotiations armed with questions, it might be possible to have them amended during negotiations. But, as always, draw a line stating your minimum requirements. If the results of the negotiation fall below your expectations, don’t be afraid to walk away.
How much can I borrow with a Secured Loan?
The amount that you can borrow depends on the type of product you’re applying for. There are a large number of secured business finance solutions to choose from, and each of them provides the funds that your business needs in their own unique way. Whilst a secured business loan can allow you to borrow anything between £5,000 to £1,000,000, other products may provide funds to your business using a variety of other methods. Invoice Discounting grants funds by allowing your business to access up to 80% of the cash tied up in unpaid invoices that are worth more than £5,000, and involve business to business transactions.
Meanwhile, how much you could obtain through a Bridging Loan to support your business’ cash flow depends on the worth of the property being used as security and how much the lender in question can afford to lend. Typically, this can between £50,000 to £1,000,000 with some lenders able to go as far as £25,000,000. So, working out beforehand how much money your business needs to realise its goals will allow you to decide early if one product or another is suitable for your business.
How will the product be secured?
When a business finance product is secured it means that, as the borrower, you have to offer assets such as valuable equipment, land or property as security. Secured products expose lenders to less risk giving them more confidence in your business when lending large sums. This is because should your business default or become unable to keep up with the repayment scheme, lenders are able to seize assets contained in your business’ balance sheet to recover their losses.
However, Invoice Finance is unique when compared to other secured products since security is obtained using customer repayments. This means that should the customer or client responsible for repaying the invoice involved after an agreed time, lenders will demand payment from your business instead. As such, finding out how each product is be secured can allow you to plan which assets to put forward or whether another means of business finance is more suitable.
Can I choose a repayment plan that suits my business?
There are a variety of repayments schemes on offer to your business, but access to them depends on the product you choose to implement. The most common repayment scheme that’s used involves Fixed Monthly Repayments. This means that for an agreed period, or term, you’re required to repay a fixed amount of cash at the end of each month. Although Bridging Loans also used Fixed Monthly Repayments again, it also gives you the added benefit of being able to delay the start of the repayment scheme to a specified date, in accordance with an agreed exit strategy. However, Invoice Discounting is repaid differently and uses repayments made by your customer or client for an outstanding invoice worth at least £5,000. As such, it’s advisable to ask lenders about how each product is repaid as this will help you know if your business can afford it without eating into your capital.
Need a Secured Loan for your business?
Scouring the market for the most appropriate finance solution for your business can be exhausting. With so many products on offer, how can you be certain you’re getting value for money? Carrying out the necessary research and price comparisons between various lenders can take time and, as a business owner, time is often a precious resource you can’t spare. But if you’re looking for a Secured Loan with a competitive interest rate, or simply wish to know more about what’s available, help is at hand.
If you want to acquire business finance and are willing to offer assets as collateral, apply for a Secured Business Loan today.