Secured loans for business purposes allow you to borrow the funds needed to start, grow or just finance your business.
In this guide, we break down what a secured loan is, how they can be used for business purposes, the application process and some bonus tips on how to get the best deal.
What we cover in this article:
- What is a secured loan for business purposes?
- Are secured loans for business purposes regulated?
- How can I get a secured loan for business purposes?
- Who offers secured loans for business?
- How can I get the best deal?
- How quickly can a secured loan for business complete?
- What are the alternatives to secured loans when borrowing money for a business?
What is a secured loan for business purposes?
A secured loan for business purposes allows you to borrow money, using a property as security, while leaving your current mortgage in place.
The secured loan lender then takes a second charge on your property, sitting behind your current mortgage lender. This charge is then removed once the loan is repaid in full.
A secured loan for business purposes can be used for almost any business purpose, including the following:
- Purchasing equipment
- To fund start-up costs
- To aid cash flow
- Buying stock
- Funding growth of the business
- Repaying other business debts – known as debt consolidation
We can also offer joint secured loans for business purposes.
Are secured loans for business purposes regulated?
When borrowing funds for business purposes on a second charge basis, even when it’s against your own home, it is not usually regulated by the Financial Conduct Authority (FCA).
This means you’ll have a greater choice of lenders who may be able to offer finance, albeit this will come at the cost of reduced consumer protection.
As such, it’s really important that you do your research before applying for this type of finance, as your home may be at risk if you fail to keep up repayments.
To keep yourself safe, you should always research before making an application. This includes checking into the reputation of any lender or broker that you plan to work with and checking the small print of any documents provided to you.
Working with an FCA regulated secured loan broker can help to offer some protection, as will working with a regulated lender.
How can I get a secured loan for business purposes?
To get a secured loan for business purposes you should either contact a reputable secured loan broker (such as ourselves) or apply to a secured loan lender directly.
Before making your application, you should prepare certain documents that the lender is likely to require. The main ones are your passport or driving licence, a recent utility bill and proof of your income.
For employed applicants, 3 months’ payslips will usually be acceptable, with 2 years’ HMRC tax documents being needed for secured loans for self-employed borrowers.
By preparing your documents upfront, you can speed up the time taken to complete your application and increase your chances of approval.
Who offers secured loans for business?
Secured loan brokers and secured loan lenders offer secured loans for business. While almost all secured loan brokers will offer funds for business purposes, not all lenders will.
The leading secured loan lenders include United Trust Bank (UTB), Shawbrook Bank and West One Loans.
If you’re looking for short-term secured lending for your business, you could consider taking out a bridging loan. The leading bridging loan lenders for business purposes include Glenhawk, Spring Finance and Together Money.
How can I get the best deal?
To get the best deal, you should compare products from across the market, as prices between different lender can vary considerably.
You can compare lenders yourself, or look to work with an experienced secured loan broker who will do all of the hard work for you. Secured loan brokers generally work with a large cross section of the market and can find you the best deal within a few hours.
Once you’re happy with the deal offered, you can make a formal application.
Be aware that when taking out a secured loan through a broker, you will have to pay a broker fee. Most brokers charge high fees, which is an area of controversy in the market at the moment. Even well-known brokers are charging fees up to 12.5% of the loan amount – £5,000 on a £40,000 loan.
We simply charge a low, fixed £995 broker fee for arranging a secured loan, with no broker fee payable until the loan completes.
How quickly can a secured loan for business complete?
Secured loans for business purposes can usually be completed in 1-3 weeks.
As mentioned earlier in this article, you can significantly speed up your application by preparing the required documents upfront. In addition, responding quickly to requests for further information and being open and honest will also serve to speed things up.
Finally, if you have a specific deadline in mind, make this clear upfront. While wanting to complete ‘ASAP’ is valid, a set date tends to focus the minds of those involved and makes it more likely that your deadline will be met.
What are the alternatives to secured loans when borrowing money for a business?
The alternatives to secured loans when borrowing money for a business are the following:
- Unsecured business loans
- Commercial mortgages
- Bridging finance
- Personal loans