A secured business loan is a type of loan that is taken out against a physical asset. This asset will be owned by the business or by one of its directors, and lenders must be able to appraise its value. The presence of this collateral asset is the key point of difference between a secured and an unsecured business loan.

Existing commercial or residential properties are commonly used to secure your loan, although vehicles, equipment or other items of value can also be utilised. The lender will take possession of this asset if you cannot pay off the loan.

There are many reasons why you might require a secured business loan.

. Replacing vehicles or equipment

.Upgrading or refurbishing your facility

.Launching new products to market

.Growing your workforce

.Covering shortfalls from unpaid invoices

.Any other expenses your business encounters in the future

There are, of course, terms and conditions attached to a secured business loan. Let’s look at a few things to think about before you opt for this kind of loan.

.Which asset will you use as collateral? How much is it worth?

.Can you afford to lose this asset in the event of a default?

.Does your credit score enable you to apply for a different loan without putting the asset at risk?

.Does your business have enough cash flow to keep up payments? Is your business plan robust enough to support this?

.A secured loan can land you a higher amount of funds, but do you currently require this level of funding?

A business line of credit is another option that is right at your fingertips. This can give you the increased flexibility and breathing space you need to start your journey towards growth.

When you apply for lines of credit, you are effectively applying for a business loan. The difference is, you won’t receive your funds all at once. Instead, you will have a set amount of credit that you can draw upon over a set period of time. In this way, the line of credit is similar to a credit card facility. Fees and charges are applied to the amount you choose to draw.

You may require a line of credit for a number of reasons:

.You aren’t sure how much credit you will need in the future.

.You don’t want to risk bad credit by borrowing too much.

.You want to augment short-term cash flow.

.You have a flexible project in mind and need flexible funding.

Business overdrafts are another option you have at your disposal. This effectively allows your business to go overdrawn and pay back the money at a later date.

Overdrafts are popular among business owners due to their flexibility, which can make overdrafts a great option in assisting with your business needs. However, we recommend discussing other lending alternatives as well to ensure you’re getting more ‘bang for buck’, especially if you are using your home or other assets to secure the facility.

Unpaid invoices can be frustrating, but they can also work to your advantage. With invoice financing, the lender effectively takes on the debt from these invoices, allowing you to leverage the funds.

You will lose some of the money you would have received, but you gain flexibility and efficiency in your funding. You will be able to pay your staff, your suppliers and your bills without having to take out a traditional loan. As your business grows, your leverage potential grows too.

As you weigh up whether or not to apply for a line of credit, you need to consider a number of different factors, including:

.Are you aware that there is still some risk involved in taking out a line of credit?

.Do you qualify? Criteria may be tougher compared to other types of loans.

.Will the line of credit cover your needs?