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Secured Business Loans

How To Get Secured Business Loans

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What Are Secured Business Loans?

Secured business loans also called collateral based business loans and are a type of traditional financing where you can secure business funding with bad credit by pledging personal and business assets as collateral. By using collateral, you are providing a guarantee to the lender that you’ll repay the loan with interest. If you default on the loan, the lender will take ownership of the pledged assets to recoup the loan. The collateral not only puts the lender at ease, but also makes the borrower more invested in business financing.

The main difference between secured business loans and unsecured business loans are the pledging of collateral. A secured loan is secured via collateral (e.g. equipment financing or property) for the loan, which the lender possess in case you default on the loan. On the contrary, unsecured startup business loans with bad credit don’t require any collateral, and the lender can’t take possession of your property in case you default on the loan.

PROS

  • Secured loans are less risky and carry lower interest rates
  • The more valuable your collateral is the higher loan amount you can qualify
  • Flexible repayment terms give the borrower more control
  • These business loans for poor credit are easier to obtain with bad credit since they rely on collateral

CONS

  • The biggest downside is the potential loss of assets (collateral) in case you default
  • Defaulting can also damage your credit and your ability to borrow in the future
  • The interest rate will be varying continuously, based on the nature of your loan

Collateral Based Business Loans

The collateral used to obtain a secured business loan must be something of substantial value. The lenders want to have collateral with enough monetary value for a business loan to recoup the loss in case a borrower defaults. Before applying for business loans, make sure to consider all your business loan options, both secured and unsecured. If you default on a loan, the lender can take possession of the collateral and sell it to recoup the loss. In addition, if the collateral doesn’t cover the debt value, the lender can take additional financial recompense.

The following are some of the most common types of collateral you can use for a business loan:

Real estate
Inventory
Unpaid invoices
Equipment
Savings accounts
Vehicles
Stocks and other investment accounts
Blanket lien

Secure a loan with Guaranteed Business Loans

Are you thinking about taking an adverse step because you don’t have any valuable belongings such as a car, house, or a yacht to offer to the lender?

In case of any discrepancy and failure to pay the debt, the borrower is personally responsible for the damage. Agreeing upon a personal guarantee means giving the lender the autonomy to see whatever and whichever asset he sees appropriate.

Secure the growth of your business with secured loans

Types of Secured Business Loans

Remember—almost all loans are secured business loans somehow. Therefore, it’s important to review the loan agreement before signing on the dotted line. Even when you’re not providing any collateral for a loan, the lender may be requiring a personal guarantee or putting a lien on your business assets. Here are the most common types of secured business loans you’ll come across:

Are you looking for a small business loan?

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Why Merchant Advisors?

At Merchant Advisors, we understand your unique needs and provide customized small business loans to keep your small business progressing.