A secured business loan is borrowing taken out by a business where an asset, most commonly commercial or residential property, is pledged as security. If the loan is not repaid, the lender can recover its money from the asset. Because the lender has that security, secured business loans are generally available over longer terms and larger amounts than unsecured business borrowing.
Where the security offered is a residential property, or a directors’ personal property, the arrangement interacts with any existing mortgage on it and the first-charge lender’s consent is normally needed. Lenders will look at the business accounts, the value of the asset, and the total borrowing already secured against it. Anyone considering putting a home forward as security for business borrowing should take regulated advice first, since the property is at risk if the business cannot keep up repayments.