Finimpact
Updated on

Best Secured Business Loans to Consider in 2022

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 and better interest rates on secured business loans.

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

Reviewed by: Sarah Brooks, Personal Finance Writer and Editor

Fact Checked by: Dr. JeFreda R. Brown, DBA, CFEI, and a highly respected financial expert

reliable

Many or all of the products featured here are from our partners who compensate us. This may affect which companies we write about and where the company appears on a page. However, any analyses, or reviews expressed in this article are those of the author’s alone, and have not been approved or endorsed by any partner.

Beyond their collateral requirement, secured business loans are no different than other small business loan 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.

icon

In this review, we highlight the terms, rates and fees of each lender, and explain what makes each them a good choice. We also share potential downsides of each company, and provide a methodology you can use to select the best secured loan option for your needs.

 

Best Secured Business Loans for 2022 - Full Overview

1. Funding Circle - Best Overall

Funding Circle

Funding Circle offers secured business loans in the form of term loans, SBA 7(a) loans, lines of credit, invoice factoring, and working capital loans. Loans will need to be secured by your business assets, such as equipment, vehicles, accounts receivable, or inventory. The application takes just six minutes to complete, and most funding takes place within five days.

Pros
Quick application and approval process
Long loan terms
Dedicated account managers
No minimum revenue requirement
Cons
Not an option for startups
Need decent credit
Higher fees
Not available in Nevada

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 ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rate
6602 yearsNone$25,000 - $500,000From 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

Founded in 2006, OnDeck has extended more than $13 billion to small businesses across the nation. The application takes just 10 minutes and funds can be dispersed that same day, if approved. OnDeck’s business loans are secured by both 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.

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

OnDeck offers both business term loans and lines of credit.. 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 ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rate
6001 year$100,000$5,000 - $250,00010.99% - 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

If you’re in need of a large amount of capital, Rapid Finance may be your best bet. They offer both secured and unsecured small business loans up to $1 million. Rapid Finance is a direct lender, but the company also partners with 70+ other lenders to make sure you get the best loan for your business. The application process is quick, and you can get funded within just a few hours of being approved for a loan.

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 loans range from $5,000 to $1 million with terms from three to 60 months. While the company doesn’t disclose specific eligibility criteria, they do state 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 ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rate
Not disclosedNot disclosedNot disclosed$5,000 - $1MNot 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 most other secured business loan providers.

4. Fundbox - Best for newer businesses

Fundbox

Fundbox offers loans and lines of credit up to $150,000. To qualify, you only need to be in business for six months, making them an attractive option for newer businesses. And rather than requesting that you use a specific asset as collateral, Fundbox puts a general lien on your business, instead. This lien gives them the right to come after your business’s assets if you default on the loan. 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 can be a good choice for younger companies, since they require only six months 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 ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rate
6006 months$100,000$1,000 - $150,0008.33% - 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 important to be aware that Fundbox offers very short loan terms. You’ll need to be prepared to pay off the financing in one 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. With Torro, collateral isn’t “required,” but it is one of the determining factors as to whether or not you will qualify for a loan. Torro also takes into consideration your credit history, debt obligations, annual business revenue, and your prior loan experience with Torro Funding, if applicable.

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

In general, Torro has more lenient qualifying requirements than some of its competitors. 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 ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rate
6806 months$120,000Up to $575,000Max 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

How to Choose the Best Secured Business Loan

There are many different factors that you need to consider when you search for the best secured business loan. Here’s what our experts looked at:

  • Loan Features: You’ll need to think about loan terms, repayment options, interest rates, 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 need to look at the invasiveness of the application information requirements, whether there’s a hard-pull or soft-pull on your credit, and the 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 customer support 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, such as payment flexibility, advertising transparency, or advanced technology.

 

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.

CompanyMin. Credit ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rates
Funding Circle6602 yearsNone$25,000 - $500,000From 4.8%
OnDeck6001 year$100,000$5,000 - $250,00010.99% - 35.20%
Rapid FinanceNot disclosedNot disclosedNot disclosed$5,000 - $1MNot disclosed
Fundbox6006 months$100,000$1,000 - $150,0004.66% -8.99%
Torro6806 months$120,000Up to $575,000Max 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?

The main difference between a secured business loan and an unsecured one is collateral. Secured loans require it; unsecured ones don’t. If you’re able to put down collateral, we recommend doing so. It eliminates risk for the lender and therefore gives you better interest rates and terms.

For unsecured business loans, take a look at these best loans for working capital.

Below is a breakdown of the differences between secured and unsecured business loans:

  • 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. Because of that, the lender will be able to offer you a lower rate.
  • 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 - 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, 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. Here are the top equipment financing lenders.
  • Term loan - A term loan is a traditional type of fixed-rate borrowing that entails a fair amount of flexibility regarding collateral. Most term loans do not require collateral, but if you have it, it’s worth mentioning to the lender to see if you can get a lower rate.
  • 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. Here are our top recommendations for SBA lenders.

 

Types of Collateral to Secure a Business Loan

Collateral is any asset that backs the loan, including cash reserves. This makes the loan significantly less risky for the lender because if you are unable to make the payments, the lender is able to confiscate the collateral. Types of collateral for secured business loans include:

  • 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.
  • PropertyThis 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-by-step business loan application process explained

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
  • Evidence of ownership of any asset being used as collateral
  • Personal and business tax returns
  • Three months of bank statements

In addition, many lenders will ask for business licenses and leases, along with other pertinent information related to your business.

 

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 to borrower. 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.
  • 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 and 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.

 

Tara Mastroeni

Written by: 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
Sarah Brooks

Reviewed by: Sarah Brooks

Personal Finance Writer and Editor

Sarah Brooks is a personal finance writer and editor with more than 10 years of experience. She specializes in personal and business loans, mortgages, auto loans, and credit cards.

More about me
Dr. JeFreda R. Brown

Fact checked by: Dr. JeFreda R. Brown

DBA, CFEI and a highly respected expert in personal and business finance

Dr. JeFreda R. Brown is more than a financial consultant: she’s an avid teacher and subject matter expert who helps people—individuals and groups in a business setting—master the skills they need to achieve lasting financial wellbeing. As Founder and CEO of Xaris Financial Enterprises, it is her passion and life goal to help others develop and maintain financial wellness.

More about me

Related Loan Picks