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Commercial Finance Secured Loans

A Brief Insight on Secured Commercial Loans and Unsecured Business Loans

If you are thinking of starting up a new business, or you are looking to expand an already successful corporate enterprise, the chances are that you will get absolutely nowhere and at light speed if you do not have access to the required type of financing you need.

When trying to source suitable commercial finance, an applicant will typically achieve funding by means of at least one, but sometimes multiple, business loan(s).  When the time arrives, the borrower will ultimately be required to decide on whether to apply for a secured business loan or an unsecured commercial loan product.

With this in mind, we need to understand the main differences between these two types of finance so that we can make an informed decision and take the most logical route.

What are secured loans for business?

A secured business loan is a long-term borrowing product that is available exclusively to applicants who are able to offer some type of collateral as security against the sum being borrowed.  In most cases, this type of finance is usually secured on a property or suitable commercial assets.  Although the borrower will typically use a commercially owned building or business asset as security, there are cases where secured business loans are taken out against an applicant’s home or primary residence.

Provided you are entirely certain that you can pay the loan back on time, and in line with the terms and conditions set out in the agreement, a secured loan is often the most affordable type of financing available to the modern business borrower.  As the loan is secured against an appropriate property or business asset, the rate of approval is generally exceptionally high and your personal credit history and company finances will not be scrutinized as they would normally be when applying for an unsecured borrowing product.

Secured business loans are usually paid out at quite a fast speed and the application process itself is incredibly quick and simple to understand.  Of course, there is a downside to all of this , which is the fact that your assets will be removed from your possession and sold on to a third party should you find yourself unable or unwilling to make the required repayments in a frequent and punctual manner.

What is an unsecured business loan?

Unsecured business or commercial loans are short to mid-term borrowing products that are not secured against an applicant’s assets.  The main benefit on offer here, is that If you are unable to pay an unsecured debt, you will not lose your home or valued assets as a direct result.  However, with an unsecured loan, you won’t be able to borrow anywhere near as much as you could if securing the funds against something of value.  The application process is also a lot less forgiving, with much tighter restrictions and you will also find that the interest rates can be quite high if you are successful in terms of accessing the funds you need to help your business grow and progress to the next stage.


Commercial Property as a Buy To Let Investment

Owing to recent tax relief changes that came into effect in April this year, a growing  number of buy to let investors have found themselves turning their backs against domestic rental properties in favour of commercial investments as a more favourable opportunity.

In addition to this, some buy-to-let experts are also considering venturing out into more complicated areas of rental accommodation such as HMOs (multiple occupancy homes) which are a popular with students who are studying away from their paternal nests.

Another area that is attracting an unusually high level of interest from buy-to-let landlords is semi-commercial property investment.  This is where one part of the building is used for business reasons, such as a high street cafe or restaurant, and another part of the same property contains a residential flat.

Whereas the residential buy-to-let sector is experiencing a number of difficulties, the commercial property rental market is seemingly unaffected by recent changes, with industrial units being the primary candidate for healthy investment with serious returns.

Why Choose Commercial Letting as an Investor?

The most significant advantage of investing in a commercial property with a view to letting is that the rents are typically much higher than with similarly priced residential lettings.  This is a particularly appealing option at a time when most landlords have found themselves having to seriously think about lowering their costs whilst improving profit margins.

Although retail premises and office spaces are currently performing somewhat less admirably in the commercial letting arena when compared to industrial offerings, the commercial property sector as a whole is doing relatively well at the moment with demand for such lettings consistently on the increase.

The Effects of the Brexit Vote

Another factor that is influencing this shift of focus is the Brexit effect and, in particular, the wide degree of uncertainty it caused.  The most obvious result of this new period of insecurity was a dramatic increase in the number of low-cost commercial property investments entering the market.

‘The slowdown in the investment market during the summer months did inadvertently create a catalogue of available assets marketed at “Brexit factored” prices,’ read a recent report published by Knight Frank.

‘This was pivotal in delivering the strong uplift seen in Q4, which represented the fastest quarter-on-quarter growth in investment volumes for three years. Overseas investors continued to dominate, with £24billion directly invested to UK commercial property in 2016 – accounting for 49 per cent of all investment.’

As the government seeks to make life more and more difficult for those in the residential buy-to-let sector, those letting commercial properties as a means of generating revenue seem to be having a much better time of things, with a growing number of UK investors choosing to abandon their domestic rental properties in favour of a more profitable experience.

Mortgages Secured Loans

Remortgaging versus Secured Borrowing

You may find it somewhat surprising to think that, when it comes to remortgaging, many borrowers remain completely unaware that another option exists.  Recently, a growing number of independent finance advisers have begun to advise their clients of a unique range of secured borrowing products which can sometimes be of a much greater benefit to the homeowner in search of additional funds.

To understand the suitability of each borrowing product, it is important that you know the basic differences between a secured loan and a remortgaging option, so we’ll take a look at each one in the next couple of paragraphs.

What are Secured Loans?

A secured loan is a long term borrowing product where the loan amount is secured against something of value.  This is usually a homeowner’s property and this is the main reason that secured loans are often referred to as homeowner loans.  Whereas personal loans have an upper ceiling of around £25k, a secured loan is only limited by the amount of equity that a homeowner is able to offer – a figure that is worked out by subtracting any outstanding mortgage debt from the market value of a property.  When applying for a secured loan, it is important to realize that your home could realistically be repossessed should you fail to make payments on time, either deliberately or through no fault of your own.

What exactly is a Remortgage?

A remortgage is very similar to a secured loan, in that the borrower is offered a loan amount in direct relation to the amount of equity they are able to provide.  However, unlike a secured loan – which may or may not be secured against a homeowner’s property, a remortgage will typically always require the applicant to put their home at risk in the event of non-payment.  With a secured loan, it is quite possible to offer other types of collateral against the amount you are seeking to borrow.

Another difference between a remortgage and a secured loan is that most remortgaging products can only be used for a limited range of reasons, such as home improvement.   With a secured loan, the borrower can typically use the funds for any purpose they see fit.  On top of this, the remortgaging application process is often quite complicated and can take a considerable amount of time to complete.

When You Choose a Secured Loan

It is usually in your best interests to apply for a secured loan whenever you need to borrow a considerable sum of money over a substantial length of time. Secured loans are also the ideal option whenever you require the funds for reasons other than home improvement, although they can also be used for this purpose if this is what you are looking to borrow for.

Unlike remortgaging products, secured loans can be taken out against additional properties that you own, other than your primary residence, and they can even be used for commercial reasons such as expanding a business or to secure new assets for a self-employed venture.

Although secured loans are typically much easier to apply for, with the funds being released in a matter of just two or three weeks, both products offer unique advantages, so it always pays to do a little research and seek sound borrowing advice from an FCA approved broker or independent advisor before deciding on which product to apply for. Work out the costs of a mortgage using our UK mortgage calculator

Secured Loans

Secured Business Funding

Raising the required capital to start and develop a new business is often the dictionary definition of a catch-22 situation.

In terms of available lenders, there are dozens of major banks, building societies and financial institutions that are happy to loan cash to the required amount.  Unfortunately, they only tend to be willing to hand over a penny if you can already prove your capacity (and that of your business) to pay it back. Which can of course be difficult, if your business either doesn’t exist or is only just getting off the ground.

You need money to get your business where you want it to be, but you need to get your business to a certain position before most will even consider lending you the required capital. Suffice to say, a difficult and frustrating situation so many business owners and entrepreneurs are probably all-too familiar with.

An Accessible Alternative

This is just one of the reasons…albeit a big one…why secured business funding has the potential to represent a far more accessible and beneficial alternative. In terms of simply getting hold of the cash you need in the first place, a secured loan could offer the kind of flexibility and affordability no conventional loan comes close to.

The key difference with a secured business funding is the way in which the loan is secured by property or assets of some kind or another. With conventional loans, you essentially need to prove your current financial situation, to such an extent as to prove your capacity to pay back the loan. With a secured loan, this isn’t necessary at all – you simply need the required collateral, in accordance with the value of the loan itself.

This way, current financial circumstances and even your future financial outlook are superfluous considerations. This in turn significantly simplifies the application process, meaning that regardless of how much capital is required, it can be obtained far more quickly and easily. Not only this, but it is often true to say that secured business funding is offered with considerably lower rates of interest and overall borrowing fees than comparable conventional loans. Which again largely comes down to the simplicity of the deal – you put up the required collateral, they provide you with the capital and repayment agreements are reached accordingly.

Speaking of which, there can also be a great deal more flexibility in terms of repayment with secured loans. Along with the usual method of paying back a specified amount on a monthly basis, it is also possible to pay larger sums on a less frequent basis, or perhaps something of a lump sum inclusive of all agreed borrowing charges at a later date.

Even if the applicant in question doesn’t have the most outstanding credit history, this rarely tends to be an issue when it comes to secured loans. The only thing needed to facilitate the loan is the required collateral – the rest rarely comes into the equation.

Time savings, low costs, simplicity and flexible repayment options – just four are the many benefits that accompany secured business funding, over and above the traditional alternative.


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