Complete Guide on Secured Business Loans in Australia
A secured loan is a kind of business finance where you can use the equity in your property as security for the funding. If the borrower makes default in the payment or fails to make the repayment, then the secured lender will claim the ownership of the property for covering the entire loan cost, this is a worst-case scenario. Thus it is less risky compared to other loan alternatives for lenders. These loans offer the most favorable terms and conditions to the borrowers, like lower interest rates and getting large loan amounts quickly. You can use residential and commercial assets as security provided there is sufficient equity available. If you are a business owner needing funds quickly and have equity in real estate, then secured business funding is the best option for you.
Different Types of secured finance
The different options that you can access as the secured financial solution are as follows.
- Unsecured business loans
- Invoice finance
- Equipment finance
- Business overdraft
- Asset finance
- Caveat loans
- Second mortgages
- Commercial bridging funds
Properties that we accept as a Security for the Secured funding
As we have mentioned earlier, we accept all types of valuable residential and commercial properties. You can use the following assets for getting secured business finance.
- Commercial vehicles
- Business Equipment
- Business Inventory
- Commercial construction
- Future invoice financing
- Business asset
When you use any movable property as collateral, like a business vehicle, the funding is known as the chattel mortgage. An additional charge gets levied on the borrower for submitting a property as collateral that does not remain fixed in a specific location. A chattel mortgage is particularly applicable for vehicle and equipment finance.
Advantages of Secured business funding
Whenever a borrower submits a property or an asset as a security against funding or a loan, it means the funding option involves lower risk for the secured lender. Due to the lesser threat involved, the interest rate is also affordable. Suppose your company is wanting to extend or boost cash flow, then offering a property as security is one of the best ways to get access to funds quickly with minimal fuss.
Factors to Consider before Applying for a secured loan
As a borrower, you should consider the below factors before applying for secured business loans.
- The property is the primary consideration of the secured lender. They put lower emphasis on the cash flow of the business and past credit score. However, some financial institutions also consider the credit score of the business owner.
- Secured funds come with an LVR or Loan to Value Ratio. This ratio indicates the loan amount that the borrower will get approval based on up to 75% valuation of the asset or property submitted.
- Some lenders but not us require a sworn property valuation on the property being used as security for secured finance approval.
Risk Associated with secured business loans.
The primary risk associated with the secured funding is if the borrower makes a repayment default, the property you offer as collateral can get be repossessed by the financial lender. With other loan options, the borrower may finance a large amount that they might not be capable of repaying. Thus, you should remain aware of how much the loan would cost you and the total repayment amount before applying for any loan.
Variable or Fixed Interest Rate secured loan.
The secured business funds usually come with two types of interest rates: variable and fixed. The main advantage of fixed interest secured funds is to know the exact amount you have to pay back for the entire loan term. It will offer a valuable cash flow certainty of the business and protect the borrower from any unnecessary increase in the interest rate while the loan lasts.
The variable interest rate for secured finance means any decrease in the interest rate will also reduce the repayment amount and thus free up the cash flow in the business. But, also consider the negative impact of an increase in the interest rate that will put additional pressure on your company budget.
Our company includes the best finance specialist to find the best secured financial solution for our clients as per their business requirements. So get started by submitting your online application today!