Secured business loans

Secured business loans are a type of funding that require businesses to use their assets as collateral - meaning that they can be sold by the lender if things go wrong. This article discusses what secured business loans are, how they work, and their pros and cons.

15 June 2022

What is a secured business loan?

A secured business loan is a type of loan where the borrower pledges assets as collateral. This means that if the company fails to repay the loan, the lender can seize and sell the assets to recoup their losses. This type of loan is often suited to companies with a healthy business credit score and assets to commit as interest rates are typically lower.

Secured business loan requirements

Funding providers have different requirements when you apply for a secured business loan. Most will review the following factors before making a decision:

Collateral: this provides loan providers with a form of security and can be anything of value that your business owns - such as property, equipment, or other assets.

Financial statements: loan providers will want to ensure that your business can afford to make monthly repayments on the investment and are likely to ask for your financial statements.

Business credit score: lenders will take your business credit score into account when making a decision. Find out how you can improve your business credit score.

Trading history: secured business loans are typically available to businesses that have been in operation for at least two years.

Personal credit history: you may also be asked to provide information about your personal credit history to support the application.

Differences between secured and unsecured loans

Applying for a secured or unsecured business loan will depend on several factors such as your business history, asset value, and funding needs. We cover the difference between secured and unsecured business loans in detail here, but a quick overview is:

Secured business loans: require collateral against the loan and often have lower interest rates since the funding provider takes on less risk.

Unsecured business loans: do not require collateral, meaning that the lender can’t sell your assets if something goes wrong - while often coming with a more speedy and simple application process.

Our Flexi-Loan is an unsecured business loan that is designed specifically for small businesses, with no early repayment fees and top-ups available if you need additional funds (subject to re-approval).

The pros and cons of secured business loans


  • often easier to qualify for than unsecured loans
  • lower interest rates
  • lenders are more likely to offer a higher loan amount.


  • you are putting your assets at risk if you can’t make repayments
  • new businesses might find it difficult to be accepted
  • may require more paperwork to prove asset eligibility.

Is a secured business loan right for your business?

The suitability of a secured business loan will depend entirely on your business. While they can come with lower interest rates and access to larger funds, you’ll be putting your assets on the line. Therefore, it’s important to determine the long-term impact on your business if things go wrong. You may want to consider alternative funding options before making a decision, such as:

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Charlotte is a Senior PR & Communications specialist at iwoca. She's been sharing news and insights about the finance industry for over three years.

Article updated on: 15 June 2022

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