Secured Business Loans - A Longer Term Solution

Unsecured business loans are rarely unsecured. They are typically 100% guaranteed by the business owners albeit not against specific assets.

Secured business loans have specific security typically in the form of property.

The unsecured loan market has all but dried up. It seemed to self cannibalise in the rush to provide government backed loans.

Secured loans are still available to businesses. They can be secured against residential and commercial property. That allows lenders to lend with more confidence.

What are the terms of the loan?

Terms can be as long as 10 years which provides a cash flow benefit. However, it is important to remember that by increasing the terms you will reduce the monthly repayments but increase the amount of interest paid over the term.

How much can you borrow?

As a rough rule of thumb you can borrow between 50-70% of the property value. It will depend on the type of property and the financial performance of the business.

You also need to take in to account any mortgage already secured on the property. If you have a property worth ￡500,000 with a ￡100,000 mortgage you may be able to borrow up to ￡250,000.

(Calculation: ￡500,000 X 70% = ￡350,000 - ￡100,000 = ￡250,000)

The valuation used by the lenders is rarely the market valuation an estate agent may advise or Zoopla may state. It will be on a reduced marketing period so it will likely be lower.

Readily available funding

The good news is that secured loans are still readily available. If you are willing to stand behind your business with tangible security there is likely a lender that will stand by your side.