How secured business borrowing works
A secured business loan gives the lender rights over specified assets under the finance documents. Those assets could include property or business assets. Security helps protect the lender; if repayments are not made, the secured assets may be at risk.
The value of an asset and the amount a lender is willing to advance are not necessarily the same. Valuation, existing debt and the lender’s requirements can all affect a proposal.
Look beyond a lower advertised rate
Compare the cost of valuation, documentation and ongoing fees as well as interest. Consider whether using the asset as security could affect a future borrowing plan or sale. A guarantee may also be requested alongside asset security.
A secured product is not automatically the right answer for every business. Assess whether the project and repayment plan justify the commitments being made.
Questions worth asking
- Exactly which assets secure this loan?
- Does the security extend to other debts or obligations?
- What needs to happen before the security is released?
- Are there costs or conditions if you refinance or repay early?
- Would the loan remain affordable if revenue fell?
What to prepare
- Details of the proposed asset security
- Existing debt secured over those assets
- Financials and a cash flow forecast
- Funding purpose and requested loan term
Common questions
Is equipment finance a form of secured lending?
Many equipment loans use the equipment as security. Other structures, including leases, have different ownership arrangements. Compare the specific contract.
Will security guarantee approval?
No. A lender still assesses its requirements, including the business and repayment capacity.
General information only. Product terms and availability vary. Check the actual proposal and obtain advice appropriate to your circumstances.