Best Secured Business Loans 2021

Many small businesses take out secured loans to fund expansion, cover staff costs, purchase new equipment and pay for a whole host of day-to-day expenses. Business owners are attracted to this type of borrowing because it is relatively inexpensive, given the fact the debt is secured with business assets. 

Secured loans can also provide borrowers access to longer repayment terms, which typically results in lower payments and more manageable cash flows.

Best Secured Business Loan Providers for 2021

If you’re struggling with where to start your search for a secured business loan, you can check out one of the providers in our list below. These platforms are the best out there, and they cater to a wide range of customers.

The Best Secured Business Loans Explained

1. Credibly - Best for Business Growth Needs

Credibly is a well-established and award-winning lender that serves more than 325 industries right across the US. It’s known for good customer service, simple applications, and early repayment.

Features

The application process is easy to follow; those with credit scores of 500+ are welcome to apply. For secured loans, a blanket lien is applied, meaning all of your business assets could be at risk in the event of default. This might put some borrowers off, but it usually means you can borrow more money.

Our Thoughts

You can’t really go wrong with Credibly, as it has one of the best reputations on the market. Just make sure to keep an eye on your payment plan to keep your business assets safe.

2. Fora Financial - Best for Startup Businesses

Fora Financial boasts a variety of financing products for owners of small-businesses, including term loans. Fora Financial is a New York-based online loan provider, which issues term loans of up to $500,000. 

Features

Fora Financial has low requirements regarding how long your business has been in operation. Thus, even a startup business, which has been in existence for only 6 months, can apply. 

Requirements vary according to loan type. For a short-term loan you need a monthly average bank balance of more than $1,000 and a $12,000 minimum in monthly gross sales. For a merchant cash advance, you need to earn over $5,000 in monthly revenue.

Our thoughts

Fora Financial business loans are easy to qualify for. You can get a merchant cash advance or a short-term loan for up to $500,000. It has an easy to follow the online application process, and your business can gain approval in less than 24 hours.  

3. Fundera - Best for Long Repayment Terms

Fundera is a popular loan connection service. Not all of the lenders that operate from the platform offer secured funding. However, when applying for a term loan, you’ll be offered a very wide range of secured options to pick from. Submitting an application won’t affect your credit score, and it’s a good way to see what you might get.

Features

Each of Fundera’s partner lenders will have different requirements on which assets you can use to secure your funding. Most will be pretty flexible. Moreover, as long as you have a good credit score, you can expect some pretty low rates.

Our Thoughts

Fundera definitely has the best customer service and loan options on our list. However, those with poor credit will need to apply at another platform, given fairly strict eligibility criteria.

4. OnDeck - Best for Short-Term Funding 

OnDeck specializes in fast, short-term funding for businesses that need cash in a pinch. It was founded in 2006, with the goal of helping out businesses that might be struggling. It’s partnered with SCORE, a non-profit that provides advice and mentorship to entrepreneurs for free. 

Features

OnDeck provides a general lien on all business assets whenever you take out a loan; although, this isn’t dependent on the value of your assets, which means you could borrow much more than you expect. The lender specializes in fast funding to cover short-term funding gaps over 12-24 months.

Our Thoughts

OnDeck is a fantastic choice for those that have been rejected by other lenders, and all applications are welcome. However, interest rates might be a little high for some. 

5. Kabbage - Best for Fast Applications

Kabbage specializes in providing lines of credit and is known for its incredibly fast application process and advanced algorithm for selecting loan options. Following a partnership deal in 2021, only applications from existing American Express customers are currently being accepted. Alternatively, you can join the waiting list. 

Features

A secured line of credit can be much more flexible than a traditional term loan. It’s a preset borrowing limit that you can draw on whenever you like. Kabbage has fairly lenient eligibility criteria and only requires that you’ve been operating for 12 months and generate at least $50,000 of revenue per year.

Our Thoughts

Kabbage’s secured lines of credit are a great choice for any American Express customer. There’s a very high likelihood of being approved, and the process is easy. The rest of us will have to join the waiting list, though. 

6. Kapitus - Best for SBA Loans

Kapitus was known as Strategic Funding until a total rebrand in 2018. It’s now known for top-notch customer service, reasonable rates, and flexible loan products.

Features

Secured loan options primarily come in the form of an equipment loan. However, if you’re applying for a standard term loan, you may be able to pledge different types of assets to secure funding. Rates are very reasonable; you could be approved within 24 hours.

Our Thoughts

Kapitus might not have the highest lending limits on secured loans, but it does have a great reputation and low rates. Eligibility criteria aren’t too strict, and it won’t hurt your credit rating to take a look. 

What Is a Secured Business Loan?

A secured business loan is a type of borrowing in which one or more of your business assets is used as collateral. If you fail to keep up with payments, the lender may seize this collateral to cover the cost. 

Typically, lenders will accept the following assets as collateral: commercial property, inventory and stock, large pieces of equipment and machinery, vehicles, and unpaid invoices. Interest rates on secured loans tend to be lower than other borrowing arrangements, but they present a greater risk to the borrower. 

Traditional lenders, like brick-and-mortar banks, prefer this type of borrowing. There’s also a host of alternative, online platforms that provide secured debt arrangements.

Secured Vs. Unsecured Business Loan: What’s the Difference?

• Risk - Secured loans will require you to put down one or more of your business assets as collateral. Should you fail to keep up with the payments, the lender may seize those assets to cover the cost. This makes this type of lending a little riskier for businesses; so, you should make sure you’re confident of keeping up the payments. On the other hand, unsecured loans are much less risky. You don’t need to post any collateral; so, none of your business assets will be at risk.
• Interest rates - Rates generally tend to be much lower for secured loans than unsecured ones. This is attributable to the collateral associated with the former. It greatly reduces the risk of lending, thereby enabling creditors to offer lower rates.
• Borrowing limits - the collateral associated with secured loans usually makes the limits significantly higher compared to unsecured loans. Because you’re borrowing against the value of a specific asset, the lender can offer greater financing flexibility. In some circumstances, the loan amount can be quite high. For example, if you post a fleet of vehicles, an expensive piece of machinery, or an expansive stock inventory, your borrowing limit could easily reach hundreds of thousands of dollars.
• Term limits - This is another area where secured loans come out on top. You might find terms as long as 10 or 25 years with a secured loan, while unsecured options tend to hover at around five-year limits.

Types of Secured Business Loans

• Mortgage - A mortgage loan is the most recognizable type of secured loan. Like a residential home loan, it entails the pledging of real estate property. For businesses, the property pledged is a commercial real estate asset.
• Equipment financing - With this type of arrangement, the borrower purchases a specific piece of equipment and simultaneously pledges it as collateral. Lenders will usually provide between 80% and 100% of the total value of the asset being purchased.
• Term loan - A term loan is a traditional type of fixed-rate borrowing that entails a fair amount of flexibility regarding collateral. The specific assignment of collateral usually involves a conversation with your chosen platform, after you’ve reviewed a number of offers and homed in on the optimal solution.
• SBA 7(a) loans - Small Business Administration (SBA) loans are guaranteed by the federal government, usually, on an unsecured basis. However, those borrowing more than $350,000 must provide some form of collateral. Options can vary across the SBA program; so, we recommend doing your research in this space.

What Kind of Collateral Can You Use to Secure a Business Loan?

• Inventory - This is a popular choice for predominantly product-based businesses, such as e-commerce stores and retail outlets that carry large amounts of stock. Bear in mind, you’ll need inventory with long shelf lives to qualify for funding.
• Property - This is a very common source of collateral, but quite risky in the event of default. Failure to keep up with payments could have a significant impact on your business.
• Equipment - Another popular choice for businesses is the pledging of equipment. This route is most often taken when purchasing equipment, vehicles, and/or specialized machinery. It is probably one of the easier types of funding to secure, given the transparent and easily verifiable nature of the purchased asset.
• Invoices - Many businesses have long turnaround times on invoices and might not receive payment for work until months after completion. Lenders can accelerate the cash flow by providing funding, as long as you are willing to pledge the invoices as collateral.
• Blanket lien - This is a common arrangement for borrowers with poor credit. A blanket lien gives the lender full discretion to use any of your business assets to cover your debt in the event of default.

How to Secure a Business Loan?

Step one - Do your research

Make sure your chosen lender will accept the type of collateral you’re offering. Some will ask for specific items of equipment or inventory, while others will provide a blanket lien. You should understand what’s at risk before you apply. It might also be worthwhile to perform a valuation of your assets beforehand.

Step two - Start submitting applications

Most alternative lenders will let you submit an application without facing a hard pull to your credit rating. This is a great way to assess your financing potential.. We recommend trying a few loan marketplaces to help increase your chances of finding an optimal solution.

Step three - review eligibility criteria

Each lender has distinct criteria you’ll need to meet before you can apply. A few fairly common criteria include your credit rating, the length of time you’ve been in business, and your monthly income. All criteria should be made clear before you apply.

Step four - Gather your documentation

Once you’ve chosen a lender and the type of secured loan you’d like, it’s time to prepare your documentation. Most secured loans will require, at a minimum, the following items: proof of identity, evidence of your monthly income, and evidence of ownership of any asset being used as collateral. 

In addition, many lenders will ask for both your personal and business tax returns for the previous few years.

Secured Business Loans Pros and Cons

Secured Business Loan Pros

• Low-interest rates - Since lenders are almost guaranteed to recover the money being loaned, either through the receipt of regular payments or seizure of collateralized assets, credit risk is low. As a result, lending rates tend to be relatively low.
• High funding limits – When taking out a secured loan, the limit can be quite high relative to an unsecured arrangement. This is especially true if you have a particularly valuable asset to use as collateral.
• Easier to obtain - If you’re already in possession of a high-value asset, oftentimes, it can be used as proof of previous business acumen. Moreover, if pledged as collateral, it can facilitate a loan approval.

Long repayment terms - Since lenders have a good idea of the lifetime of any assets pledged, this can often result in generous repayment terms, often up to 25 years.

Secured Business Loan Cons

• Higher risk - Borrowers should always be aware that any asset they pledge as collateral could potentially be seized in the event of default. Make sure the collateral you pledge isn’t critical to your business.
• You must have an established business - It’s very rare for startups to be able to access secured funding, simply because they haven’t been around long enough to accumulate a pool of marketable assets. This usually translates to relatively high-interest rates for newbies.

See Our Additional Guides on Business Loan Types

• Invoice Factoring
• Small Business Loans for Veterans
• Commercial Real Estate Loans
• Small Business Loans for Minorities
• Business Loans for Bad Credit
• Small Business Loans for Women

Final Thoughts

For those asking if a secured loan is right for their business, we’d say that, in most cases, the benefits outweigh the disadvantages. A secured loan is an excellent way for established businesses to get fast access to funding for a variety of purposes. You can get your hands on low-interest rates, high borrowing limits, and generous repayment terms. 

As with any type of loan, there are risks to consider, but those that have done their research will usually find a secured loan to be very beneficial to their business.