Best Secured Business Loans for Small Businesses

Loans for businesses, whether secured or unsecured, may be used for expansion, maintenance, or even starting a firm from scratch, but it could also grow challenging debt.

Still, securing a business loan against one or more of your assets may be the best option to get the funds you need to expand if you own a company in the United Kingdom. By requiring collateral, the lender reduces the risk that they will lose money if you default on the loan. 

Your chances of getting a secured loan authorised go up, and the conditions, rates, and loan amounts given to your company improve as a result. There is a wide selection of lenders in the United Kingdom, including traditional banks and those operating in the alternative finance sector.

In this review, we look at some of the best secured small business loans for small businesses, and key features.

At a Glance, Pros and Cons

This section summarises the pros and cons of top secured small business loans for your SME.

If you have been denied an unsecured loan before but are able to put up collateral in exchange for a lower interest rate, you may be authorised for a secured loan. Lenders are more comfortable loaning more money over longer periods of time at lower interest rates if they feel secure. Here's some clarification:

Pros

✔️ Better interest — Offering collateral reduces the cost of a loan, making secured business loans more affordable than unsecured business loans and other forms of company borrowing. This is because there is a solid secondary source of repayment, reducing the risk of loss for the lenders. 

✔️ Often lets you borrow more — The value of the item (or assets) you pledge to secure the loan determines the maximum amount you may borrow. The total value of these assets might be used as collateral for a loan.

✔️ Longer repayment length — The monthly payment on a loan is reduced when the duration of the loan is stretched out over a longer length of time. This frees up cash flow, allowing you to concentrate on expanding your firm.

✔️ Reduces need for a solid trading or credit history — In most cases, a strong trading history or excellent credit history (credit file/report — they mean the same thing) is not required, since the assets you utilise serve as a guarantee for the lender. For a firm with a less-than-perfect credit past, a solid choice is to rely on a less-than-perfect credit history. Lenders will consider the company's track record, and they may ask for a personal guarantee from a director as extra security.

Cons

❌️ Hard assets required — Not every company will be in a position to put up the necessary assets as collateral. If you default on a secured loan, the lender may sell the collateral to recuperate their losses.

❌️ Upfront costs — This is due to the fact that the bank cannot be trusted to secure the company's continued growth.

❌️ Harder to get — Valuation expenses and legal fees, if the lender levies a legal charge on your property, will likely be required up front. Your loan application might be denied or its size reduced based on the results of the appraisal; nevertheless, you will still be responsible for paying the valuation charge.

❌️ Longer registration process — The lender's due diligence procedures add time (potentially weeks) to the time it takes to have access to the money compared to other forms of financing.

❌️ Negative compounding spiral — The entire cost of a loan becomes more important when borrowing over a longer period of time. Borrowing expenses may add up over time, even at a modest interest rate.

Top secured business loans for small businesses – Reviews

To get down to business, no pun intended, let us look at the top secured small business loans for SMEs. Make sure the service you want to use falls within the FSCS's purview.

1. Tide — Top-rated secured loans for small businesses with fast open banking

Tide's loan offering depends heavily on open banking services, which enable any company to connect to the Tide APP and securely communicate financial information regardless of which bank the firm uses. Tide may use this technology to speed up the loan approval process by rapidly collecting data and processing it using its own algorithms. 

A few examples of the many types of loans offered by Tide Business Loans include start-up financing, working capital, and invoice discounting. Grant financing, equity loans, and merchant cash advances are all available.

Useful because: No other business finance process is quicker. Tide is able to highlight the ease with which loans are approved by using data from open banking.

Visit Tide

According to the company's website, “Our fastest business loan was received in 3 minutes 24 seconds”, making it the quickest available.

There are no surprise fees or penalties associated with a Tide loan's adaptable repayment schedule. Smaller loans are also available with a light credit check and no collateral required.

Tide has a good reputation and a lot of satisfied customers, so it is a viable option on the market. Due to their recent acquisition of Funding Options, they will now have an abundance of financial expertise inside the company.

Although, it is hard to get feedback from customers who have really used the service.

Several different types of small-business loans are available via Tide. Here's a rundown of the many kinds: £500 to £100,000, between 12 and 60 months.

You can use a Tide Startup loan for everything from goods and equipment to human resources and growth. Quickly approved loans with cash deposited within hours are available for terms of up to 5 years or months. Both the interest rate and the payback schedule are flexible, based on the needs of the individual company.

For eligibility: you should not have more than 36 months of business history. The minimum age to apply is 18, and you must be a UK resident. Each company owner or partner may borrow up to £25,000 (for a maximum loan amount of £100,000).

2. Funding Circle — Well-reviewed secured business loans for small businesses

Funding Circle and other peer-to-peer lenders represent a new class of safe business loan providers; they provide unsecured loans to companies for lengths of up to five years.

The interest rates are comparable to, or even lower than, what you would get from a bank. However, while using a P2P lending platform, you may be required to pay arrangement or completion fees.

One of the many new peer-to-peer lenders to appear in the UK in recent years is Funding Circle.

Visit Funding Circle

Lenders on a P2P platform are average people who wish to make investments in UK companies to develop their assets. This translates to a low AER and simply a few additional costs for enterprises.

Borrow £20,000 for 12 months at fixed monthly payments of £1,752, with a 2.5% completion charge and about £526 in interest. The whole payment due is £21,026. The range for the loan amount is £5,000. Annual percentage rates (APRs) begin at 4.50%. 6 month — 5 year loan terms.

3. Boost Capital — Popular secured business loan for small businesses for alternative lending

Instead of P2P lenders, loans for businesses can be obtained from banks in two forms: secured and unsecured. Unsecured loans often have higher interest rates and need more stringent underwriting (bank checks to ensure you can repay the loan) from the lender.

Boost Capital is one of them: some banks may be hesitant to lend due to the recent financial crisis, while others still provide attractive rates and reasonable arrangement costs.

Visit Boost Capital

Many clients in the UK have given the alternative lender Boost Capital a perfect score on review sites like Trustpilot, making Boost Capital a very popular choice.

You may be approved in under 24 hours and have the money in your account in as little as two days with their rapid financing option. Borrow £10,000 for a year at a sample APR of 47.9%. An annual percentage rate of 36.74%. (fixed). There is a total due of £12,100.

They provide loans from £3,000 up to £500,000. A typical monthly APR ranges from 1.5% to 2.5%. Length of loan: 4-18 months.

4. Start Up Loan Company — Top secured SME business loans (Government Loan Program)

Start Up Loan (SULCo) has helped thousands of companies get off the ground in the UK. Those in need of a business loan to launch a company may find this an attractive option.

In the business world, the term “government loan” is often used to refer to a loan that is guaranteed by the government in exchange for a fee. The British Business Bank is a government-backed financial institution that makes loans to both new and established companies in the UK.

Which means that firms may acquire loans from lenders they may not have had access to previously, and at rates that are comparable with other options.

Visit Start Up Loans

While the application procedure for these programs is often more time-consuming, they might be a great choice for forward-thinking businesses.

This loan is designed for firms with fewer than 24 months of history that might use both financial aid and business mentorship to get off the ground and succeed. The Start Up Loans Company (SULCo), a subsidiary of the British Business Bank, administers the Start Up Loans initiative on behalf of the Department of Business, Energy, and Industrial Strategy (BEIS).

It aims to boost the number of businesses being started in the UK and their chances of success. Individuals who are just getting their company started or have been in operation for less than three years are eligible for loans (ranging from £500 to £25,000 at 6% interest) as well as free mentorship and coaching via this program.

You can get low-interest personal loans and free business mentorship to launch or expand your company. Borrow up to £25k (Average UK personal loan size is £7,200). The interest rate is set at 6% per year. Loans may be repaid over a period of 1–5 years, and no application nor prepayment penalties apply.

5. Capify — Well-regarded UK secured loans for SMEs

Capify is another highly regarded lender that has been in business since 2008 and has assisted hundreds of company owners in achieving their growth and sustainability goals.

Capify, formerly known as United Kapital and Capiota, is a direct lender that first opened for business in 2008.

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Capify, with headquarters in Manchester, offers financing to small and medium-sized enterprises (SMEs), stores, and restaurants throughout the United Kingdom. Cash advances and business loans both need repayment on a daily or weekly basis.

Goldman Sachs Private Capital extended Capify a credit facility worth £75 million in January 2019 so that the company could continue lending money to small and medium-sized businesses.

Capify offers quick and flexible business financing that can be used for everything from paying for new equipment or an office renovation to taking your firm to the next level. Applying via the Capify website is a simple and fast process.

Targeting small and medium-sized businesses, they promise a decision in 60 seconds and custom-made answers to your problems. Borrow £24k for 12 months at an APR of 67.89% (representative). The whole payment due is £29,472.

6. Shawbrook Bank — Trusted secured loans provider for small businesses who are scaling

Asset finance, working capital solutions, point-of-sale financing, structured finance, and commercial mortgages are just some of the services Shawbrook Bank securely provides to its corporate clients.

This bank department, known as “Business Credit”, provides credit to companies with annual sales of between £2 million and £100 million in the United Kingdom. With this money, company owners of SMEs may focus on a wider range of mission-critical tasks.

Shawbrook Bank is very competitive (relative to other “established” competitors) in terms of the speed with which it provides customers with financing, the variety of loan products, and the quality of service it provides, as mentioned in our assessments.

Visit Shawbrook Bank

The bank services 20 different business sectors. According to the latest Customer Satisfaction Survey, 95% of respondents said they were satisfied with the company's customer service.

Shawbrook also offers a variety of secured loan packages to clients with credit scores anywhere from near prime to super prime, with the loans being secured by either primary or investment residences.

This money can subsequently be used toward a number of goals, such as paying off debt, making necessary house repairs, or buying a once-in-a-lifetime piece of consumer goods. In the bank's 2015 client Insight Survey, this department was rated at 92% in terms of client satisfaction.

This implies that new firms may get the equipment and staff they need to get started, and that more established enterprises can use larger sums to support growth. Borrow between £250,000 and £25,000,000.

7. NatWest — Competitive secured business loans for small businesses and high-flexibility

NatWest is a well-known bank that offers several financial products to companies. These include loans tailored to smaller enterprises, fixed-rate loans, government-backed recovery loans, bank overdrafts, and corporate credit cards.

The variety of lending and financing alternatives available via NatWest has amazed us. In addition, many of the loans provide adaptable repayment conditions, such as the ability to roll over interest or skip payments entirely.

Visit NatWest

Large business loans are also catered to by NatWest, with variable loan amounts being potentially infinite based on the individual circumstances of each firm.

Several negative comments have been made about the service's customer support team's sluggish response time. If you are in a rush and need the money for your company immediately, this might be difficult.

We also learned that there is a dearth of data for some loan categories. There is no pre-application eligibility checker you may use to gauge your chances of acceptance. There is sometimes a lack of detail on average interest rates or the documentation that may be required to apply for many of the loans.

Borrow between £1,000 and £10,000,000. Interest may be either fixed or variable, and principal and interest payments might be split. There are no fees for prepaying before the end of the 25-year term. Possible breaks in the loan's repayment schedule. It is possible to incur arrangement and security costs.

8. Cubefunder — Leading alternative UK secured business loans

In the event that you need a short-term loan for your company, go no further than Cubefunder. Windsor-based Cubefunder's online application procedure results in a financing decision in as little as 48 hours.

Cubefunder provides business loans ranging from £5,000 to £100,000.

Visit Cubefunder

Small, regular payments, such as those made daily or monthly, will be made against a predetermined, upfront fee. The term “cubefarmer” refers to a person who makes a living by selling his or her services to other firms.

Businesses often need to generate capital to pay for things like inventory and necessary upgrades, fix cash flow concerns, renovate, or pay taxes and value added tax.

On Trustpilot, 79% of users give Cubefunder a perfect “Excellent” rating. They have found Cubefunder's customer support to be responsive and helpful, and they like how the company takes the time to learn about them and their business. There are many who say the application procedure is confusing and deceptive.

Top secured business loans for small businesses – Buying Guide

Let’s explore further, learning about what really comprises the secured business loans. 

What is a secured business loan? 

You can use one asset, or the combined worth of numerous assets, as collateral for a secured loan to your firm. Lenders are more likely to provide more favourable repayment terms when they are backed by collateral, such as your property.

The term “business loan” is often used to describe a loan given to a company or individual by a bank or other lending institution. However, there are also additional forms of secured loans. For instance, invoice financing enables you to get financing based on the value of your unpaid bills and other accounts receivable. 

Because of the lower risk to the lender in a secured loan, not only are you more likely to be approved, but you will also be able to borrow more money over a longer period of time and get preferential interest rates compared to an unsecured loan.

Many financial institutions and alternative financing providers are willing to lend money to businesses in order to help them expand. This may include buying new equipment or hiring more workers. A company loan (secured or unsecured) might be the ideal solution if you want the stability of regular monthly payments within a certain time period.

Example of a secured business loan

Here's a basic illustration of a secured loan:

• You request for a £200,000 loan, with the business property you own serving as collateral.
• After reviewing the application, the lender may make a conditional offer based on the results of an independent appraisal of the property to be used as collateral.
• The fee covers the lender's up-front expenses, such as conducting an appraisal and paying for legal representation if they decide to put a lien on your home.
• Your collateral is worth more to the lender than the amount you owe on the loan.
• At a fixed rate of 5% per year, you will pay back £3,774.25 over the course of 60 months.
• Your interest payments will amount to £26,454.76.

How to open

Commonly, a lender will contact you after you fill out a brief form to get a quotation for a secured business loan to ask for further information and for your approval to run any necessary credit checks. When all the facts are in, they may make a determination about your credit. If approved, you may get the funds within 48 hours of making your first inquiry.

The loan payback plan is outlined in the loan estimate. Keep in mind that the interest rate is liable to vary based on movements in the Bank of England Base Rate while deciding whether or not to apply. If we decide to increase your rate, we will let you know 30 days in advance.

Overpayments of up to 10% of the loan total per year are allowed without incurring early settlement costs by some lenders. If you pay off your loan early, you will have to pay a penalty of 2% of the remaining amount in the first 6 months and 1% of the remaining balance in the first 12 months.

If your company is vulnerable to seasonal fluctuations, you may take advantage of an interest-only term lasting up to 24 months. Lenders often accept direct debit, although some may also take bank transfer, debit card, or PayPal.

Secured SME loan requirements

In the United Kingdom, the standards for a secured business loan are often less stringent than those for unsecured financing, however this varies from lender to lender.

If you or your company have valuable assets and are willing to pledge them as collateral for a loan, you may be able to get a secured business loan.

Lenders will look at your credit history, the value of the asset (or assets), and the purpose of the loan. They will also look at your company's trade history. Even if your company has no trading history, investors will consider you because of the value of your assets. 

Lenders will look at your credit history, but even if it is not stellar, you will still need to show that your firm is strong and can afford the loan payments. You will require a minimum of three months of company registration in the UK. 

The general requirements for obtaining a secured business loan are: 

• To qualify, your business must be based in the UK and get more than half of its revenue from sales.
• Your business structure must be either a Ltd or LLP (where at least one of the partners is a Ltd.
• You may only use the funds for legitimate business expenses (such working capital, expanding, or refinancing debt) related to your primary company activity in the United Kingdom.
• Latest filed accounting or management information must show a minimum annual turnover of £350,000. 
• Directors and shareholders of your company are adults who possess property in the United Kingdom.
• All CCJs have been paid off or are currently being paid off. 

How to open a savings accounts for business

Opening and managing a business savings account online is becoming a common practice. This makes them as hassle-free and simple to use as any corporate checking account. Some service providers in the market, however, can only process phone or written requests and applications. 

You can get this service through the majority of the major high street banks and at certain building societies if you desire a more personal contact with your business savings provider.

Debt in business: Busting the myths…

You now have a reliable set of guidelines for maintaining a positive cash flow and eliminating debt. However, you could have some lingering concerns that prevent you from moving further. That is not lost on us. Let us dispel some common misconceptions about company debt and find out what can really set you free.

Myth 1 — You need to borrow, you need debt to expand.

Can a business expand with no surplus money invested?

First, you do not need a lot of money to keep your company afloat. To think beyond the box (like a brick-house pig) requires nothing more than time and nerve. Many would-be company owners have asked themselves, “How do I fund my business with no money?” In reality, though, many startups have meagre budgets of £5,000 or less.

To reduce financial risk and soften the blow of inevitable growing pains, start and build your firm slowly, at the pace of your cash flow. There is an additional benefit to operating on a monetary basis: it forces you to halt and consider your options.

Spending actual cash from your bank account will cause you to feel pain, making you reconsider if you need that flashy new work vehicle and the accompanying corporate debt.

Myth 2 — I have to have a credit line to even out my financial flow.

Second, having an organised accounting system makes it possible to plan for unexpected cash flow changes. Let us say you know that winter is a slow time for your lawn care or construction firm. You will be able to offer your own line of credit during the off season if you have done a good job of planning, budgeting, and saving (again, those lovely retained profits).

Myth 3 — Travelling and online purchases are impossible without a credit card.

Thirdly, unlike credit cards, which pose concerns of carrying over balances and large interest rates, debit cards do not need the use of a bank account (Monzo vs. Starling review) and may be used immediately.

Unfortunately, 53% of all small businesses report using credit cards to finance their business, 4 and 17% of new small businesses report using credit cards to finance their start-up, not just make certain types of purchases. 

Myth 4 — I have to take on a lot of debt in order to finance substantial purchases like property or heavy machinery.

You should not make a major investment until you have taken the time to pause, consider, and plan the most effective means of expanding your firm. The greatest methods to spend money on expensive goods or services are the following four:

1. Make a cash purchase (this may need some patience as you save up).
2. Instead of making unaffordable monthly payments or purchasing more stuff than you need, just rent the equipment or the space.
3. Hire someone else to do it (or borrow their tools). Use a printing service, for instance, if you are not a printing specialist. Do not waste time or money on it.
4. Invest in secondhand items (even if it means putting up with their flaws and age). You may get out of debt and start saving money by being resourceful and making due with less luxuries in the meanwhile. Rather you risk losing money because you could not make payments on nicer furniture, it is preferable to get a wonderful bargain on some not-cute, paid-for furniture. Slow and steady wins the race, or so they say.

Leading secured business loans for small businesses: The Verdict

A popular example of business financing is a secured company loan. Owners hope that it will aid in the growth and development of your organisation. The borrowing and repaying of money is similar to that of personal loans. When you take out a personal loan, as opposed to a loan for your company, you are individually responsible for making the loan payments.

Is this, however, only a myth? Okay, here are a few more facts. 

In the words of Dave Ramsey, the truth is, there is a large, ferocious wolf in the woods. He is coming for your company, and it might be in the shape of new rivals, economic chaos, or some other surprise.

The truth is that being in debt really makes you weaker. In many cases. Keep in mind that a borrower remains in the lender's debt forever.

The last (better) reality is that it is possible to weather the unexpected so long as you work hard to become and remain debt-free. It is acceptable to use corporate debt to launch a firm. You may build your way out of debt gradually.

For more, see our top business loan accounts.

Related Guides:

• Best Small Business Loans
• Best Start-Up Business Loans
• Capify Review – Easy Business Loans