Publilius Syrus’s statement, “Money alone sets the entire world in motion” holds true to the world of business. Starting a new business involves huge investments. You may have big plans for the business but they won’t work if you don’t have the money to finance them. There are different sources to finance the business. But the best and cheap alternative available in the finance market is the secured business loans.
What are Secured Business Loans?
Secured business loans require borrowers to put a security against the loan. Borrower’s commercial properties, machines or equipments can work as collateral. Secured business loans can be used to start up a new business or to enlarge the existing one. An entrepreneur can also utilize secured business loan to finance the working capital, which can be used to purchase raw material, paying the labour charges etc.
Borrowers can enjoy various benefits with secured business loans. A borrower gets the freedom to use the property which is kept as a security against the loan, to ensure smooth running of the business. Secured business loans are offered at low interest rate as the loan is secured against the loan.
Fixed or Flexible Interest Rates
With a secured business loan, borrowers get the option to pay either a fixed interest rate loan or a flexible interest rate loan. In a fixed rate loan, the interest rate is fixed in the beginning of the loan term and it remains constant throughout the loan period. While, a flexible rate loan implies that the rate of interest varies with fluctuations in the market rate of interest. A borrower can choose the interest rate according to his or her convenience.
Running a business is very risky, filled with uncertainty. You may get huge profits one month and big losses next month. Thus, returns are unpredictable. In such circumstances, flexible repayment option offered by secured business loans can be helpful.
Who Can Apply for A Secured Business Loan
Secured business loan providers can finance small as well as big businesses. You can borrow any amount ranging from $25,000 to $10 million. Few lenders can provide your business loan for a higher amount too. Amount of loan you can borrow depends on the value of the collateral and the lender you select. Repayment term of a secured business loans can be extended up to 30 years.
Common Requirements for A Secured Business Loan
You need to stay prepared with some documents and business plan to apply for the business loan. A borrower needs to submit following documents with the lender to get a secured business loan:
- Business financial statements
- Business tax returns
- Personal financial statements and tax returns
Preparing A Business Plan
The next thing you need to work on will be the business plan. Your business plan must include information regarding the product you produce or plan to produce. Give details about your present and future marketing strategies, what are other sources of finance you have employed in your business, your management structure and the risk involved in the business. So highlight your financial performance both in the past and in the future. You will be more impressive if you have carefully thought-out and become familiar with your plan. A good business plan can brighten up the possibility of getting a fast and cheap secured business loans.
Your Credit Score Matters, Too
A borrower needs to concentrate on one more area, that is, his or her credit score. This will be an important aspect on which the lender will be looking at. Most private lenders will put more weight on the collateral you present than traditional lenders. So try to improve your score by paying out old debts and it will be easier for you to grab good rates in the market or look for private money lenders who are more lenient when it comes to credit scores.
What’s Next
Secured business loans are offered both by private lenders as well as traditional financial institutions. The can benefit business owners who are in need of additional capital for their existing or new business ventures. When choosing a lender, evaluate and compare loan quotes and find the one which you find the best satisfying your needs and expectations.
