Finimpact

Best Secured Business Loans

Secured business loans are backed by an asset that is used as collateral for the loan. Thanks to that collateral, borrowers can often get access to more flexible qualifying requirements or better interest rates on secured business loans.

Best Secured Business Loans
Tara Mastroeni
Written by:Tara Mastroeni
Real Estate and Personal Finance Expert

Beyond their collateral requirement, secured business loans are no different than other options on the market. They can be used for a variety of expenses, such as working capital, purchasing real estate, or buying equipment. Our experts reviewed and ranked the best secured business loan options available to help you get funded.

Our Top Picks for Best Secured Business Loans

fundingcircle
  • No minimum annual revenue requirement
  • Few restrictions to your loan purpose
  • Quick and straightforward application
Credit Score
Min. Credit Score 660+
Loan Amount
Loan Amount $25K-$500K
Loan Repayment
Loan Repayment Up to 10 years
ondeck review
  • Discounts for repeat customers
  • Funding in 24 hours
  • Loans available to companies with bad credit rates
Credit Score
Min. Credit Score 600+
Loan Amount
Loan Amount $6K- $100K
Loan Repayment
Loan Repayment 3 - 18 months
rapid-finance
  • Efficient application process
  • Great customer service
  • Generous lending limits
Min. Credit Score
Min. Credit Score Varies
Loan Amount
Loan Amount Up to $1 million
Loan Repayment
Loan Repayment 3-60 months

How to Choose the Best Secured Business Loan

There are a few different factors that you need to consider when you search for the best secured business loan. We've laid them out for you below. They're also the factors that our experts used to rank the best lenders in the business.

Here’s a closer look at what you need to keep in mind when shopping around:

  • Loan Features: You’ll need to think about loan terms, repayment options, and loan amounts. Generally, choosing a secured loan may help you access a higher loan amount then if you chose a similar unsecured option.
  • Application process: You’ll also need to look at the invasiveness of application information requirements, whether there’s a hard-pull or soft-pull on your credit and its score impact, plus funding time. For secured loans, you'll usually need to provide some specific information about your assets.
  • Interest rates and fees: Learn about the different types of fees that the loan requires, as well as the minimum and maximum interest rates offered.
  • Qualification process: Educate yourself on the qualification process, including any requirements for minimum credit score, annual revenue, or business history. Typically, choosing a secured loan allows for more lenient qualification requirements.
  • Customer support - Consider the accessibility to a live CSR representative, the degree of multi-channel support, and the availability of supplemental information and tools.
  • Online user reviews: Be sure to read reviews on independent review sites like Trustpilot
  • Perks and Bonuses: Look for any specified service offerings like payment flexibility, advertising transparency, or advanced technology.

Best Secured Business Loans - Full Overview

1. Funding Circle - Best for long-term loans

While not all of Funding Circle’s small business loans require collateral, those that do may need to be secured by either your personal or business assets, depending on your lending partner’s requirements. In particular, the company notes that longer term loans and those used for major investments, such as expansions, are more likely to be secured.

Pros
Quick application and approval process
Long loan terms
Dedicated account managers
Cons
Not an option for startups
Need decent credit
Higher fees
Funding Circle

Funding Circle requires two years of business history and decent credit in order to apply for one of its secured business loans. Yet, there is no annual revenue requirement, making it more flexible than some of the other options on this list. In addition, Funding Circle allows you to borrow up to $500,000, which should be enough funding to satisfy most borrowers’ needs.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

660

2 years

None

$25,000 - $500,000

From 4.8%


The Bottom Line

Funding Circle’s secured business loans are a good option for established businesses who need some extra funding. You can be sure that you'll be in good hands with a dedicated account manager assigned to each loan. Additionally, their loan terms stretch up to five years, which will give you the time you need to pay back what you borrowed.

2. OnDeck - Best for same-day funding

OnDeck’s business loans are secured by a general lien on your business and a personal guarantee. With this setup, you won't be forced to put up a specific asset as collateral, which makes their funding available to a wider variety of businesses, particularly those that may not have a specific asset that they can tie to their financing.

Pros
Same-day funding
Strong customer reviews
Transparent pricing and loan comparison tools
Cons
Not available in all states or for all industries
Lower loan amounts
Personal guarantee requirement
ondeck review

OnDeck offers lenient qualifying requirements, meaning that it might be a fit for the majority of businesses. In order to qualify, you only need to have one year in business, $100,000 in annual revenue, and a credit score of at least 600. That said, keep in mind that OnDeck’s interest rates are fairly high. Those with weaker financial profiles will likely be subject to higher rates.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

600

1 year

$100,000

$5,000 - $250,000

10.99% - 35.20%


The Bottom Line

Consider using OnDeck as your lender if you only need a small amount of funds. Ondeck’s same-day funding options, lenient eligibility requirements, and strong customer reviews make it one of this list’s top contenders. However, if you dislike the idea of having to personally guarantee your loan, you’ll probably want to look elsewhere.

Try OnDeck

3. Rapid Finance - Best for large funding requests

Rapid Finance offers borrowers a choice of whether they want an unsecured or a secured business loan. That said, the company makes a point of explaining that choosing a secured loan can help decrease the cost of funding and increase the amount of financing that you may receive. In particular, This lender offers secured business loans worth up to $1 million.

Pros
Easy application process
High maximum loan amount
No hard credit pull required to apply
Cons
Does not disclose eligibility requirements
Does not disclose rate and fee information

rapid finance review
Rapid Finance chooses not to disclose its eligibility criteria on its website. In a blog post, the company states that credit history, time in business, revenue, and public records all play a role in their decision-making process. However, they don't offer any specifics, which can make it extremely difficult to determine if you'll be able to qualify for a loan.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

Not disclosed

Not disclosed

Not disclosed

$5,000 - $1M

Not disclosed

The Bottom Line

Since there is no hard credit pull associated with applying for a loan with Rapid Finance, there's very little downside to seeing how much funding you can receive. Additionally, if you're fairly confident in your business’s financial profile, this lender allows for higher funding amounts than a lot of other secured business loan providers.

4. Fundbox - Best for newer businesses

Rather than requesting that you use a specific asset as collateral, Fundbox puts a general lien on your business when you take out a loan with them. This lien gives them the right to come after your business’s assets if you default on the loan. Plus, they also require that every borrower signs a personal guarantee for the loan.

Pros
Lenient eligibility requirements
Stellar customer service reputation
Ability to renew loan without reapplying
Cons
Short loan terms
No option for monthly repayment schedule
Personal guarantee requirement

Fundbox review
Fundbox can be a good choice for younger companies, since they require only one year in business and a credit score of just 600. By the same token, their minimum annual revenue requirement of $100,000 is lower than some of their competitors. However, in exchange for the more lenient qualifying requirements, you're limited to a lower loan amount.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

600

6 months

$100,000

$1,000 - $150,000

8.33% - 18%


The Bottom Line

The flexible eligibility requirements of Fundbox make them a great fit for newer businesses who don't have the business or credit history of more established companies. With that in mind, it's also important to be aware that Fundbox offers very short loan terms. You’ll need to be repaired to pay off the financing in a year at most.

Try FundBox

5.Torro - Best for startups

Torro offers secured business loans in the form of startup funding and working capital loans for existing businesses. However, they offer very little information about how the collateral requirement will work. Rather than explaining if you need to put up a specific asset as collateral or if there will be a lien put on your business, the company chooses to hide “collateral requirements” in the fine print.

Pros
Fast funding process
More lenient lending requirements
Offers options for startups
Cons
Lack of transparency
Short loan terms
Potentially high fees
torro

In general, Torro has more lenient qualifying requirements than some of its competitors. At 680, their credit score is slightly higher. However, companies only have to show a business history of six months and an annual revenue of $120,000 to secure a working capital loan worth up to $575,000. Those opting for its lower-limit startup funding will face even fewer requirements.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

680

6 months

$120,000

Up to $575,000

Max 1.49 Factor Rate


The Bottom Line

Pinning down exact approval requirements from Torro can be tough because they supply funding through a network of partner lenders. However, it’s one of the only options on the market for startups, which means that the ambiguity may be worth it for some borrowers.

Try Torro

Best Secured Business Loans - Features Comparisons

Now that you’ve taken an in-depth look at the various funding options that are available to you, here is a side-by-side comparison of their eligibility criteria and interest rates. Use this information to help you decide which secured loan company is right for you.

Company

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

Funding Circle

660

2 years

None

$25,000 - $500,000

From 4.8%

OnDeck

600

1 year

$100,000

$5,000 - $250,000

10.99% - 35.20%

Rapid Finance

Not disclosed

Not disclosed

Not disclosed

$5,000 - $1M

Not disclosed

Fundbox

600

6 months

$100,000

$1,000 - $150,000

4.66% -8.99%

Torro

680

6 months

$120,000

Up to $575,000

Max 1.49 Factor Rate

What Is a Secured Business Loan?

A secured business loan is a type of borrowing in which one or more of your business assets is used as collateral. If you fail to keep up with payments, the lender may seize this collateral to cover the cost.

Typically, lenders will accept the following assets as collateral: commercial property, inventory and stock, large pieces of equipment and machinery, vehicles, and unpaid invoices. Interest rates on secured loans tend to be lower than other borrowing arrangements, but they present a greater risk to the borrower.

Traditional lenders, like brick-and-mortar banks, prefer this type of borrowing. There’s also a host of alternative, online platforms that provide secured debt arrangements.

Secured Vs. Unsecured Business Loan: What’s the Difference?

  • Risk - Secured loans will require you to put down one or more of your business assets as collateral. Should you fail to keep up with the payments, the lender may seize those assets to cover the cost. This makes this type of lending a little riskier for businesses; so, you should make sure you’re confident of keeping up the payments. On the other hand, unsecured loans are much less risky. You don’t need to post any collateral; so, none of your business assets will be at risk.
  • Interest rates - Rates generally tend to be much lower for secured loans than unsecured ones. This is attributable to the collateral associated with the former. It greatly reduces the risk of lending, thereby enabling creditors to offer lower rates.
  • Borrowing limits - the collateral associated with secured loans usually makes the limits significantly higher compared to unsecured loans. Because you’re borrowing against the value of a specific asset, the lender can offer greater financing flexibility. In some circumstances, the loan amount can be quite high. For example, if you post a fleet of vehicles, an expensive piece of machinery, or an expansive stock inventory, your borrowing limit could easily reach hundreds of thousands of dollars.
  • Term limits - This is another area where secured loans come out on top. You might find terms as long as 10 or 25 years with a secured loan, while unsecured options tend to hover at around five-year limits.

Types of Secured Business Loans

  • Mortgage - A mortgage loan is the most recognizable type of secured loan. Like a residential home loan, it entails the pledging of real estate property. For businesses, the property pledged is a commercial real estate asset.
  • Equipment financing - With this type of arrangement, the borrower purchases a specific piece of equipment and simultaneously pledges it as collateral. Lenders will usually provide between 80% and 100% of the total value of the asset being purchased.
  • Term loan - A term loan is a traditional type of fixed-rate borrowing that entails a fair amount of flexibility regarding collateral. The specific assignment of collateral usually involves a conversation with your chosen platform, after you’ve reviewed a number of offers and homed in on the optimal solution.
  • SBA 7(a) loans - Small Business Administration (SBA) loans are guaranteed by the federal government, usually, on an unsecured basis. However, those borrowing more than $350,000 must provide some form of collateral. Options can vary across the SBA program; so, we recommend doing your research in this space.


What Kind of Collateral Can You Use to Secure a Business Loan?

  • Inventory - This is a popular choice for predominantly product-based businesses, such as e-commerce stores and retail outlets that carry large amounts of stock. Bear in mind, you’ll need inventory with long shelf lives to qualify for funding.
  • Property - This is a very common source of collateral, but quite risky in the event of default. Failure to keep up with payments could have a significant impact on your business.
  • Equipment - Another popular choice for businesses is the pledging of equipment. This route is most often taken when purchasing equipment, vehicles, and/or specialized machinery. It is probably one of the easier types of funding to secure, given the transparent and easily verifiable nature of the purchased asset.
  • Invoices - Many businesses have long turnaround times on invoices and might not receive payment for work until months after completion. Lenders can accelerate the cash flow by providing funding, as long as you are willing to pledge the invoices as collateral.
  • Blanket lien - This is a common arrangement for borrowers with poor credit. A blanket lien gives the lender full discretion to use any of your business assets to cover your debt in the event of default.

How to Get a Secured Business Loan?

Step one - Do your research

Make sure your chosen lender will accept the type of collateral you’re offering. Some will ask for specific items of equipment or inventory, while others will provide a blanket lien. You should understand what’s at risk before you apply. It might also be worthwhile to perform a valuation of your assets beforehand.

Step two - Start submitting applications

Most alternative lenders will let you submit an application without facing a hard pull to your credit rating. This is a great way to assess your financing potential.. We recommend trying a few loan marketplaces to help increase your chances of finding an optimal solution.

Step three - review eligibility criteria

Each lender has distinct criteria you’ll need to meet before you can apply. A few fairly common criteria include your credit rating, the length of time you’ve been in business, and your monthly income. All criteria should be made clear before you apply.

Step four - Gather your documentation

Once you’ve chosen a lender and the type of secured loan you’d like, it’s time to prepare your documentation. Most secured loans will require, at a minimum, the following items: proof of identity, evidence of your monthly income, and evidence of ownership of any asset being used as collateral.

In addition, many lenders will ask for both your personal and business tax returns for the previous few years.

Secured Business Loans Pros and Cons

Secured Business Loan Pros

  • Low-interest rates - Since lenders are almost guaranteed to recover the money being loaned, either through the receipt of regular payments or seizure of collateralized assets, credit risk is low. As a result, lending rates tend to be relatively low.
  • High funding limits – When taking out a secured loan, the limit can be quite high relative to an unsecured arrangement. This is especially true if you have a particularly valuable asset to use as collateral.
  • Easier to obtain - If you’re already in possession of a high-value asset, oftentimes, it can be used as proof of previous business acumen. Moreover, if pledged as collateral, it can facilitate a loan approval.

Long repayment terms - Since lenders have a good idea of the lifetime of any assets pledged, this can often result in generous repayment terms, often up to 25 years.

Secured Business Loan Cons

  • Higher risk - Borrowers should always be aware that any asset they pledge as collateral could potentially be seized in the event of default. Make sure the collateral you pledge isn’t critical to your business.
  • You must have an established business - It’s very rare for startups to be able to access secured funding, simply because they haven’t been around long enough to accumulate a pool of marketable assets. This usually translates to relatively high-interest rates for newbies.

Final Thoughts

While secured business loans do require that an asset be used as collateral to secure the funding, they also have their advantages. Often, choosing a secured loan can help you access a better interest rate or more lenient qualifying requirements. If you’re interested in accessing this type of loan for your business, use this list of lenders to help you get started finding the right match for you.

Related Loan Picks

About the Author

Tara Mastroeni

Real Estate and Personal Finance Expert

Tara Mastroeni is a strategist and writer with over a decade of experience creating content for the real estate and personal finance industries.

More about me