Best Secured Business Loans in July 2024

Secured business loans use collateral to reduce lender risk, potentially unlocking more attractive rates and terms. Collateral can include cash deposits, business assets or real estate.

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By Jill A. Chafin | Edited by Abigail Bassett and Janet Schaaf | May 29, 2024

Secured business lenders at a glance

Bank of America: Best secured business loan for traditional bank

Starting at $25,000

7.25%

Up to 60 months

Not disclosed

24 months

Pros

  • In-person customer service and expert insights
  • Occasionally offers reduced introductory rates and waived fees
  • Free rewards program for business members

Cons

  • Doesn’t disclose maximum rate ranges
  • Not ideal for startups
  • Must have $250,000 in annual revenue to qualify

Why we picked it

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With over 6,000 branches nationwide, Bank of America is an excellent choice for businesses looking for a traditional bank experience and in-person support. Funding options include secured term loans and secured business credit lines starting at $25,000. While interest rates start low, term loans include a 0.50% origination fee of the total loan amount, and at least $150 in upfront and renewal fees for lines of credit.

Going with a traditional bank has certain advantages, such as access to business bank accounts, in-person appointments, personal loans for business and free rewards programs. However, startups should look elsewhere since Bank of America requires a two-year business history, plus an annual revenue of at least $250,000 to qualify.

Read our Bank of America review.

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Funding Circle: Best secured business loan for online term loans

$25,000 to $500,000

15.22%

6 to 84 months

660

24 months

Pros

  • Flexible repayment terms
  • Dedicated account manager to help your business succeed
  • Fast funding times

Cons

  • A personal guarantee is required
  • Doesn’t report payments to all credit bureaus
  • Not all industries are eligible

Why we picked it

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Funding Circle is an online lender offering competitive secured business term loans ranging from $25,000 to $500,000. With a streamlined application process, you could receive funds as quickly as two business days after approval. Funds can be used for a range of business purposes like covering payroll, inventory, hiring staff, renovations and more.

Funding Circle also offers funding options for women-owned businesses and minority entrepreneurs. In addition to pledging collateral, any owner with at least a 20% stake in the company must sign a personal guarantee.

Read our Funding Circle review.

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Wells Fargo: Best secured business loan for lines of credit

$100,000 to $1,000,000

Prime + 0.50% (subject to a 5.00% minimum)

12 months (with annual review)

Not disclosed

24 months

Pros

  • Revolving funds for short- and long-term expenses
  • High funding amounts
  • Monthly interest-only payments

Cons

  • Must have $2 million in annual revenue to qualify
  • Charges a 0.50% origination fee, due on an annual basis
  • Doesn’t list credit score criteria

Why we picked it

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The Wells Fargo Prime Line is a secured business line of credit designed for high-earning companies with at least $2 million in annual sales. Secured by non-real estate business assets, businesses can borrow up to $1,000,000 as needed for short-term working capital expenses or long-term projects — only paying interest on withdrawn amounts.

As a traditional bank, Wells Fargo offers a wide range of small business solutions, including business bank accounts, business credit card rewards, merchant services and tailored support. There are also more than 7000 Wells Fargo locations nationwide in case you need in-person support.

Read our Wells Fargo review.

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SBA: Best secured business loan for long-term loans

$50,000 to $5,000,000

Prime + Prime + 3.00%

Up to 300 months

680 (recommended) (recommended)

24 months (recommended)

Pros

  • Capped interest rates
  • Long repayment terms
  • A range of funding amounts available

Cons

  • Processing times typically take longer than other types of business financing
  • A high credit score is recommended
  • Business must be physically located and operating in the U.S. or U.S. territories

Why we picked it

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Business owners needing access to higher loan amounts and longer repayment terms can consider an SBA loan, such as the popular SBA 7(a) or SBA 504 loans. Borrowers unable to qualify for traditional funding might have better luck getting an SBA loan since the U.S. Small Business Administration (SBA) guarantees a portion of the funds, helping minimize lender risk.

SBA-secured loans start at $50,000, although lower amounts might be available without providing collateral. You can find an SBA lender through a traditional bank, credit union or online lender. Businesses with a FICO Score of 680 or higher tend to have higher chances of approval.

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National Funding: Best secured business loan for equipment financing

$3,000 to $150,000

Not disclosed

24 to 60 months

600

6 months

Pros

  • Quick funding times
  • Equipment acts as collateral so no down payment required
  • Offers a Lowest Payment Guarantee

Cons

  • Not ideal for purchases over $150,000
  • Annual revenue of $250,000 or higher needed to qualify
  • Lack of transparency regarding interest ranges

Why we picked it

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Companies needing to acquire or upgrade heavy equipment or machinery can access up to $150,000 with National Funding’s equipment financing and leasing. With a low minimum credit score of 600 and only six months business history required, this is a great option for startups or those looking for a bad credit equipment loan.

Business owners can enjoy competitive rates with National Funding’s Lowest Guarantee Program — if you find a lower equipment leasing price with a competitor, you could receive a $1,000 cash bonus (reasonable restrictions apply). However, you may need to look elsewhere if your equipment purchases will exceed $150,000.

Read our National Funding review.

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What is a secured business loan?

A secured loan is a type of small business financing where the borrower pledges collateral to help minimize lender risk.

Collateral is typically an asset that the lender can seize if you default on the loan. For small businesses, assets like equipment, cash savings or real estate will often serve as collateral for secured business loans.

Since the collateral acts as a guarantee for the funds, startup businesses and businesses with bad credit may have better success obtaining a secured business loan over an unsecured loan.

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How to secure a business loan

There are several ways to secure business loans with collateral:

  • Property: Whether it’s your home, car or commercial real estate, you could put up your property as collateral for a loan. The challenge with this form of collateral is that the value is uncertain, so your lender may require an appraisal.
  • Savings: Lenders see cash as the best collateral, as its value is more liquid.
  • Inventory: Similar to property, inventory is a less tangible asset than cash savings and like other forms of property, inventory may require an appraisal to count as collateral.
  • Invoices: With invoice financing, you can use unpaid invoices as a form of collateral to get access to funding.
  • Equipment: Equipment financing companies typically use the equipment you want to purchase as collateral — meaning they can repossess the equipment if you default on the loan.
  • Blanket lien: A blanket lien acts as security for a loan because it will collateralize all assets of a business. It is less concrete than the other forms of collateral discussed above since it gives the lender the legal right to seize your business assets if you default on a loan. Lenders may even apply this in addition to collateral because there are multiple assets to cover the loan amount.

Types of secured business loans

The following types of business loans require collateral and can help you tackle a range of short- and long-term business projects.

SBA loans

Backed by the Small Business Administration (SBA), the SBA loan program offers lower interest rates and longer repayment terms to borrowers who wouldn’t otherwise qualify for small business financing.

The SBA 7(a) loan is ideal for day-to-day working capital expenses, while the SBA 504 loan can help finance more significant projects, like expansions or equipment. While SBA loan requirements vary by lender, you must provide collateral for loans over $50,000.

Term loans

If you need a lump sum of cash upfront, consider a business term loan. Secured small-business term loans typically have lower interest rates and more flexible repayment terms since they are backed by collateral. For more significant projects, a long-term business loan can provide up to $5 million with repayment terms from seven to 25 years.

Lines of credit

A business line of credit is similar to a credit card: You get approved up to a certain limit and can draw from that amount as often as needed, only paying interest on the amount you use. However, when comparing a business credit card versus business line of credit, note that secured business lines of credit typically have higher borrower limits and lower interest rates.

Equipment financing

Equipment loans can help companies purchase or upgrade essential equipment and machinery needed to keep their businesses running smoothly. Since the equipment acts as collateral, equipment financing typically has more lenient eligibility requirements compared to other types of secured business loans. While you might need to provide a 20% down payment, lenders like Taycor Financial offer 100% financing with no down payment.

Commercial real estate loans

Businesses can use commercial real estate loans to purchase commercial property. The financed property typically acts as collateral, meaning the lender can seize it if you fail to repay the debt. If applying for a bank or credit union business loan, you’ll need at least a two-year business history, consistent revenue and a down payment to qualify.

Accounts receivable financing

Accounts receivable financing, also called invoice financing, provides quick access to cash by using a company’s unpaid invoices as collateral. This form of financing differs from invoice factoring, which involves selling your unpaid invoices to a factoring company in exchange for a cash advance.

Secured vs. unsecured business loans

An unsecured business loan is financing that doesn’t require collateral. However, unsecured loans may still require a personal guarantee or blanket lien, which obligates the borrower to repay the loan.

Because of the role collateral plays, there are a few more differences between unsecured and secured small business loans:

Secured business loanUnsecured business loan
Loan termsCollateral can allow for longer repayment termsTypically short term due to increased risk for the lender
Interest rateInterest rates tend to be lower because of reduced lender riskInterest rates tend to be higher for business loans without collateral
Credit scoreLenders may be more lenient on credit scores with the additional security of collateralLenders tend to have high credit score minimums without collateral

Pros and cons of secured business loans

ProsCons

  Easier qualifications: Collateral typically allows the lender to be more lenient about eligibility requirements.

  More favorable terms: Lenders typically provide longer terms and possibly lower interest rates due to reduced risk.

  Greater flexibility: Securing a loan can give you the flexibility of different financing options like equipment loans, invoice financing, business lines of credit and business term loans.

  Loss of collateral: You risk losing your collateral if you can't make payments.

  Slower time to funding: Because lenders need the appraisal value of your collateral, the approval and funding time can take longer than other types of small business financing.

  Additional fees: You may have to deal with origination fees based on the amount financed.

How to get a secured business loan

Here are six steps to get a secured business loan.

1. Calculate how much you need

Review your business budget to estimate what you need to cover essential purchases for your company. Also take into account whether you need the funds all at once or spread out over time. Although secured loans typically offer lower interest rates, you could end up paying more if you opt for a longer repayment term.

  Use our business loan calculator to estimate how much you could borrow.

2. Evaluate your business qualifications

Review each lender’s general business loan requirements online, such as minimum credit score, annual revenue and collateral requirements. While alternative lenders typically have more lenient qualification requirements for secured business loans, you’ll likely pay higher rates than with traditional financing.

It’s a good idea to check your credit scores before applying to know your eligibility options. Boosting your credit score in advance could help you qualify for more competitive offers.

3. Choose your collateral

Collateral requirements vary by lender and loan type. In general, you could pledge equipment, real estate, invoices or financial assets as collateral for business loans. If you can’t meet the lender’s collateral requirements, you may want to consider unsecured business loans instead.

4. Compare secured business lenders

You can apply for secured business loans via traditional banks, credit unions or online lenders. Pay attention to hidden fees since these extra costs can jack up the overall cost of your loan. Also, make sure the lender reports on-time payments to the major credit bureaus so you can keep building your business credit.

You can read small-business lender reviews before applying to find the best options for your needs.

5. Gather required documents

Lenders typically require certain documents during the application process. While the exact documents will vary, here’s a general idea of what you’ll need:

6. Apply and review

Most secured business loan applications can be completed online, but some lenders might require a phone call or in-person visit. Secured business loans typically take longer to approve and fund since the lender must review your assets. For example, it can take months to receive your funds after being approved for an SBA loan, although you can reduce this timeline to two weeks by working with an SBA-preferred lender.

Make sure to review all loan offers to ensure you understand the rates, repayment term and additional fees.

How to compare secured business loans

Consider the following loan details when picking the best secured business loan for your needs:

Interest rate: Secured business loan rates can vary greatly based on lender and the loan type. Pay attention to whether the rate is variable or fixed and how that will affect your payments over the long run. Going with the lowest interest rate will typically save you the most during the loan’s duration.

Repayment term: Secured loans could require daily, weekly or monthly payments. Make sure to crunch the numbers before signing the dotted line to ensure you can keep up with the repayment schedule.

Time to fund: If you need funds fast, you might want to consider a quick business loan with an alternative lender. In some cases, you could receive funds one to three business days after approval. However, you typically have to pay higher interest rates with fast business loans.

Additional fees: Read the fine print in your business loan agreement for extra fees, such as origination fees, late charges and business loan prepayment penalties.

Loan purpose: Some business loans come with restrictions on how to spend the funds. Check with your lender to ensure their loan is an ideal match for your business type. In general, a working capital loan can fund most business expenses, such as payroll, inventory, expansions and more.

Alternatives to secured business loans

While a secured business loan has many advantages, business owners without adequate collateral might need to consider other options. Here are some additional ways to fund your small business.

Unsecured business loans

You typically don’t need to pledge physical or financial assets to qualify for unsecured business loans. And some loan types, like equipment financing and commercial real estate loans, don’t require advance collateral since the property you want to purchase helps secure the loan.

However, you will often need to sign a personal guarantee and/or business lien when getting an unsecured business loan in order to help reduce lender risk.

Startup business loans

New businesses without an established credit history or solid annual revenue could consider startup business loans from alternative and traditional lenders. These lenders tend to take a “big-picture approach” by looking at your overall business idea and potential for growth instead of requiring robust personal and business credit scores. However, you typically need a business history of at least six months to qualify for startup financing.

Small business grants

Small business grants are available from local and nationwide government and nonprofit organizations, as well as private companies. If eligible, you could receive funds for your business that don’t need to be repaid. However, small business grants tend to be time-intensive and competitive.

Business credit cards

If you’re looking to finance day-to-day expenses, business credit cards are another option to consider. Eligibility criteria is typically less stringent than traditional business financing, plus you can earn bonus and business travel rewards along the way.

However, credit card interest rates are typically significantly higher than traditional loans. Because of this, it’s best to pay off your balance in full each month.

Crowdfunding

GoFundMe for business can help you raise money for specific projects or goals. All you need to do is create a business profile and broadcast a funding goal, then start collecting donations from friends, family and the public. Crowdfunding works best with businesses that have a solid online presence and are able to offer a specific product as an incentive.

How we chose the best secured business loans

We reviewed the leading small-business lenders to determine the overall best five secured business loans. To make our list, secured business loan lenders must meet the following criteria:

  • Minimum time in business: Options available to companies with a business history of six to 24 months.
  • Minimum credit score: Personal credit score requirements of 680 or lower.
  • Rates and terms: We prioritize lenders with competitive rates, limited fees, flexible repayment terms, a range of loan amounts and APR discounts.
  • Repayment experience: We consider each lender’s reputation and overall business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide customer perks, like free business coaching and support.

Frequently asked questions

Both secured and unsecured business loans exist. With a secured loan, you’ll need to pledge collateral, such as property or cash. An unsecured loan doesn’t require collateral, but as a tradeoff, it may come with higher interest rates and lower borrowing limits.

Compared to unsecured loans, secured loans may be more likely to be approved because the required collateral reduces the risk to the lender. But, because the collateral will need to be appraised, it may take longer to get your funds.

Getting a startup business loan with no money can be challenging since most lenders want to see a steady source of revenue with a business history of two or more years. However, some lenders are willing to lend to new businesses when collateral is included since this reduces their overall risk. Online lenders such as National Funding or Taycor Financial offer secured loans for businesses less than a year old.

Yes, you may be eligible to get a secured business loan with bad credit. If you have a lower credit score, providing collateral may be a way to reduce your risk to lenders. For example, Taycor Financial offers equipment financing to business owners with credit scores as low as 550.

The timeline for applying for a business loan varies based on the lender and loan type. In general, online business loans have quick processing times, allowing you to receive a decision within minutes. Often, the funds are deposited on the same day or within a few business days. In comparison, an SBA or traditional bank loan is more time-consuming, with funding times lasting up to 90 days.