6 min read
Not every funding need lines up neatly with a single asset purchase. A secured business loan gives a business access to a lump sum for broader purposes, backed by security over assets it already owns.
What it is
A secured business loan is a lump sum advanced to a business, repaid with interest over an agreed term, and backed by a legal charge over one or more assets such as machinery, vehicles, or in some cases property. Because the loan is secured, terms are often more favourable than unsecured borrowing.
Unlike hire purchase or a lease, the funds are not tied to purchasing a specific new asset, giving the business flexibility over how the money is used.
Who it suits
- Businesses needing working capital to bridge a gap, cover a tax bill, or fund growth
- Companies consolidating several smaller debts into a single, structured facility
- Businesses investing in a project that does not fit a single-asset finance product, such as building renovation or a new enterprise
- Owners with unencumbered assets who would rather use them as security than sell equity in the business
How it works
The lender assesses the value of the assets offered as security, alongside the business's trading history and ability to service the loan, and agrees a loan amount, term and rate accordingly.
- Assets assessed and offered as security for the loan
- Loan amount, term and repayment schedule agreed based on the business's circumstances
- Funds released as a lump sum for the business to use as needed
- Regular repayments made over the agreed term
Typical terms
| Term | Typical range |
|---|---|
| Term length | 12 to 84 months depending on purpose and security offered |
| Deposit | Not applicable; loan amount is based on security and affordability |
| Payment frequency | Monthly, quarterly or seasonal |
| End of agreement | Loan fully repaid; charge over assets released |
| Security | Charge over specified business assets, sometimes including property |
Pros and trade-offs
Where it works well
- Flexible use of funds, not tied to a single asset purchase
- Can often achieve more favourable terms than unsecured lending
- Useful for consolidating existing borrowing
- Repayments can be structured to suit the business's cash flow
Trade-offs to weigh
- Assets pledged as security are at risk if repayments are not maintained
- Valuation and legal costs may apply depending on the security offered
- Approval depends on both asset value and the business's trading position
Worked example
Worked example: working capital loan secured against machinery
- Loan amount
- £60,000
- Security
- Charge over existing unencumbered plant
- Term
- 36 months
- Indicative monthly repayment
- Approximately £1,880
- Purpose
- Bridging a seasonal cash flow gap while a large invoice is outstanding
These figures are illustrative only, based on an assumed rate, and are not a quotation.
If you have a funding need that does not fit neatly into a single asset purchase, talk to us about whether a secured loan could work for your business.
Next step
Talk through the numbers with us
Send us the details of the asset and we will come back with an indicative figure and a properly structured option from the funder panel. No obligation, and no pressure to proceed.