A business which needs money goes to a lender, much like an individual. And like the personal loan there are two types of loans for business, unsecured and secured business loans.

What Is A Secured Business Loan?

A secured business loan is simply a loan where the lender has been guaranteed payment of the loan amount in the event that payments stop. This guaranty is usually an asset pledged to cover the loan. Some examples of assets used for secured loans are:

• Computer leases
• Home mortgage
• Car loan or lease
• The Small Business Association
• Equipment or inventory

While the lender is not looking to claim these assets, they will have rights to the assets in the case of loan default.

Provision of Collateral

Lenders of secured business loans go through the evaluation of collateral in order to determine the amount they can comfortably lend. Common types of collateral include:

• Equity in your home
• Accounts receivable
• Inventory and equipment of the business

Some of the key variables which indicate the loan terms you will be able to secure are:

• Number of years in business – this is the business track record or age of the business. Most banks require that a business have at least three years of operation to show solvency.
• Size of the business – some lenders deal mainly in corporate credit while others have a small business development section. There are also a range of loan products more suited to various size companies depending on the lender.
• Amount of money needed – lenders have a range of what they consider an acceptable loan amount. Business lenders who deal with larger corporations will not consider loans under a certain amount, while others will but the terms of the loans will be different depending on the amount of money required and why.

Why Use A Secured Business Loan

While a secured business loan does require collateral or assets pledged against the loan, there are times when a secured business loan would be better suited to your needs. Here are a few ways in which this would work:

• You are just starting out in business
• Your needs require larger amounts than the lender would consider with an unsecured loan.
• Business tax purposes
• Payments on a secured business loan show the lender you are stable when you need to borrow again at a later time.

Having a secured business loan often means that important pieces of your business are tied up with lenders. It also means having and gaining more available resources and ability to gain further resources if needed.