What is a Secured Business Loan and Should You Get One?
As a business owner of a growing business, you may need capital to expand your operations. You know there are many options for small business financing out there and are curious about what route to take.
If you are considering a loan, you may be wondering, “Is a small business loan secured or unsecured?” We are going to answer this question, explain what secured means for a business loan, and help you decide if you should get one.
So, to start off, let’s define a secured business loan.
What Is a Secured Business Loan?
According to the U.S. Chamber of Commerce, a secured business loan requires specific collateral such as a company vehicle or commercial property the lender can claim if the loan is not paid.
These loans are often easier to get approved for than unsecured loans because you must offer up collateral. If you default on this type of loan, the lender will recoup its losses by selling your collateral.
Common Forms of Collateral
Collateral is an asset that a borrower offers up to the lender to help them qualify for a loan. Here are some of the most common forms of collateral for secured business loans.
- Real estate
- Machines and equipment
- Financial investments
- Bank accounts
- Insurance policies
- Accounts receivable
- Rare collections
All of these high-value possessions are used for secured business loans as collateral just in case you default on the loan. Lenders use collateral as a way to protect the loan they provide you. You will keep your collateral as long as you are able to pay off the loan in full.
Is a Small Business Loan is Secured or Unsecured?
A small business loan can be secured or unsecured depending upon the lender. For instance, SBA loans are usually secured but some business loans from online lenders are unsecured. How do you know if a small business loan is secured or unsecured? There’s a pretty simple way to tell whether it is secured or not.
An unsecured business loan is given based on creditworthiness alone. A secured business loan is backed by a type of collateral such as the ones listed above. So, if the lender is requiring collateral, then it is a secured business loan.
Typically though, the loan information will explicitly tell you if it is an unsecured loan. So when you are researching different lenders, you should be able to tell from the information they provide about their services on their website.
Now that you know what a secured loan is, let’s take a look at some of the benefits that come along with it.
Should You Get a Secured Business Loan?
What are the benefits of getting a secured business loan? And should you get one over an unsecured business loan?
Secured business loans are better than unsecured loans for many businesses. These loans are generally more flexible and provide better terms. Consider your business’ needs and decide if a secured business loan is the right choice for your small business.
Benefits of Secured Business Loans
There are certain benefits that come with secured business loans, such as:
- Lower interest rates. With secured loans come lower interest rates. This is because the collateral offered lowers the risk for the lender. As long as you have good credit and collateral, you should be able to secure a low rate.
- Longer repayment periods. Secured business loans typically have longer repayment periods with better terms. For example, loan repayment periods can go as high as 30 years for a mortgage.
- Larger loan amounts. Larger loan amounts are granted for many secured business loans because the lender is taking on less risk. The more your collateral is worth, the larger the loan you will likely get approved for.
- Easier approval process. Generally, secured business loans have an easier approval process even for business owners with lower credit scores. Since you are required to offer collateral, there is less risk for the lender.
As you can see, there are plenty of advantages to getting a secured business loan to help your business grow. With lower rates, longer repayment times, larger amounts, and easier approval, secured business loans are a great option for any business.
Choose LendThrive for Your Secured Business Loan
Whether you’re interested in an unsecured loan or a secured loan is right for you, LendThrive has your back! LendThrive offers both secured and unsecured loans as well as fixed rate business loans up to $150K in as fast as 24 hours with instant pre-approval.
With low fixed rates and flexible terms, LendThrive’s business loans give businesses the freedom to succeed.
Get approved in as little as 24 hours for a fixed rate business loan from LendThrive! Apply today or contact us for more information.