Are you looking for a small business loan with a lower interest rate? Do you have collateral to offer to the lender? A secured business loan is the right funding option for your small business. The primary feature of this business loan is that to get the funding at a reasonable APR or interest rate and flexible repayment schedule but the lender demands collateral, which is control over the valuable assets, from the borrower. Would you be comfortable lending something precious to someone who has a record of not giving it back? Same is the case with the lenders; they don’t want to risk losing massive money, so they ask the borrower to offer collateral. As a borrower is offering valuable assets to the lender so lending companies offer secured business loan at the ideal rate.
Let’s explore a secured business loan in-depth, how you can you apply for a loan, and everything there is to know about secured business loans.
What is a Secured Business Loan?
In simpler terms, a secured business loan is a remarkable funding option which is only offered to the borrower who is willing to put up collateral. Collateral is like a security blanket; it reassures the lender that borrower will make the payments on time whatsoever. It is a win-win situation for both the borrower and the lender. The lending company knows that money is coming back to them, and the borrower enjoys a business loan because he or she is getting a loan amount of more than fifty thousand dollars with the lower interest rate possible.
How can borrower apply for the secured business loans?
The applying process of a secured business loan is similar to the applying process of the rest of the loans. All it takes is three simple steps:
The first thing you need to do is to fill out an online application. Make sure you have financial documents, business-related documents, and personal documents resting beside you while you are filling out the application. Carefully type in all of the relevant numbers. Quickly scan all the information that you have entered. Don’t forget to attach the business plan.
A borrower is not directly responsible to carry out the second step. The lender evaluates your application, calculates the interest rate according to the credit score, and offers a contract to the borrower.
- Get Funded
Once the lender has offered the loan to the borrower, then you sign, only and only when you are satisfied with all the terms that are mentioned in the contract. Evaluate and compare the interest rate of the lending companies and make a wise pick!
What assets can act as collateral to secure a secured business loan?
As it is already mentioned, collateral can be any valuable asset that a lender can sell and cover up the financial loss. Have a look at the following list and offer collateral to the potential lender.
Offering the car or house doesn’t settle well for some of the small business owners, so you can also offer money that is been resting in your bank for years. If you are comfortable with this type of collateral, then you must apply for cash-secured business loans. Just a friendly reminder, if you fail to make the repayments on time, the lender will have control over your cash. Exercising caution is a must!
Often, small business owners have drawers full of pending invoices. When applying for a secured business loan you have an option to offer those pending invoices to the lender and get a business loan in return.
If you don’t feel comfortable in offering personal belongings or outstanding invoices, then there is a third option. A borrower can offer his or her real-estate properties, cars, houses, and succulents. The same rule applies here, if you default on your payments, the lender will seize your assets.
These are the most important types of collateral offered by the borrower, but you must check in with your lender and see if the company is willing to accept different types of assets then the above-mentioned ones.
Steps to follow when applying for the Secured Business Loans
- Pick collateral.
The first step is to pick collateral to offer the lender and calculate its value. Make sure you and your potential lender are both on the same page. If a borrower decides to refinance his or her loan, he or she does not have to offer collateral again and again.
- Calculate the value of the asset.
Before signing the dotted line, take out your calculator, and find out the exact financial value of the potential assets. If this is out of your league, then lenders recommend hiring a professional auditor so know your financial worth.
- Weigh the pros and cons.
Once the lender has handed over the contract to you, you must consult the financial advisor to assess the credibility of your decision. Get it terms with the financial loss you will be facing if the lender seizes your assets. But most importantly, if you think your business needs an extra flow of cash to cover the operating costs or availing the golden opportunity and a secured business loan is a reasonable funding option, then it a risk that is worth taking!
- Be your best!
Lastly and most importantly, portray the good impression by showing financial worth to the potential lender and all will fall in place. So, wear a confident smile and knock at the door of the alternative lender.
We recommend you to follow these points before applying for a secured business loan. Merchant Advisors offers the best funding and financing to small business owners. For more ideas and tips to keep your small business running, you can follow us on Twitter (@Onlinecheck) and Facebook (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer your every question and guide you throughout the way.