Secured Business Loans vs. Unsecured Business Loans – it’s one of the most common questions that we get asked. What is exactly is the difference, and which one is right for my business?

Secured Business Loans allow borrowers to use an existing asset (one or multiple) to secure the amount of the loan. For instance, as the owner of a work vehicle, you may be eligible to secure the value of a business loan against the value of the vehicle. 

For lenders, secured business loans provide an added level of security by using an asset as a form of guarantee against the loan. By offsetting the risk to the lender, secured business loans can typically offer borrowers better repayment terms and rates than a comparable unsecured business loan.

Securing finance means opening the door to new business opportunities and new growth. Through secured loans, businesses can benefit from the value of existing assets to secure capital that is required to take their business to the next level.

By taking a security, lenders can effectively offset their risk and, in the event of the lender defaulting, ensure that they are not left empty handed. For lenders, taking a security means two things:

  1. Borrowers are far less likely to default on their loan
  2. In the event of a fault, lenders have the power to recoup their costs

The benefits of secured business loans for lenders are obvious, but what about for businesses looking to borrower?

For businesses, the upside of taking out a secured loan is better rates, better lending terms, and access to a broader range of lending products. Because secured loans are ‘less risky’ for lenders, borrowers have greater freedom in the amount that they can borrow and how those funds are used.

How to Get A Secured Business Loan in Australia

Looking to access funds and grow your business? Here’s the step-by-step process for getting a secured business loan in Australia.

Step 1:  Determine your needs – define the purpose of your loan, the amount required, and how a business loan can help you to achieve your business goals.

Step 2: Choose your collateral – whether you’re borrowing against a vehicle, property, or work equipment – it’s important to understand the value and leverage of your asset.

Step 3: Find the right lender – not all lenders are created equally, so it’s important to find the lender that suits your business and your objectives. Comparing interest rates, terms, and fees can help you to get a better idea of the most suitable option. A broker can save you the leg work and help you to secure the best loan by comparing options and matching you based on a range of different factors.

Step 4: Prepare your documents – lenders require financial statements, business plan, and information about your collateral. 

Step 5: Submit your loan application – once you’ve got your paper work in order, you can submit your application.

Step 6: Offer & acceptance – once you’ve been approved, it’s important to understand the terms of the loan, repayment terms, and interest rates. Once you’ve read and understand the conditions, you can then accept the offer.

Step 7: Use your funds – once you’ve been approved, the lender will then deploy the funds for your intended business purpose. From new equipment to covering ongoing expenses, it’s important that your spending matches your stated intended usage.

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