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How To Get A Secured Business Loan in 2023

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Secured business loans use collateral to reduce lender risk, allowing small business owners to potentially unlock more attractive rates and terms.

Collateral can include cash deposits, business assets or real estate. But if you fail to repay the loan, the lender can seize the collateral to recoup its losses.

What is a secured loan?

A secured loan uses a form of collateral to minimize the risk to a lender. Collateral is typically an asset that the lender can possess 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.

Best secured business loans in 2023

Here’s a list of our top lenders offering secured business loans.

Bank of America: Best for established businesses

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Loan amountsStarting at $25,000
Term length
  • Up to 48 months with business assets as collateral 
  • Up to 60 months with CD as collateral
Est. interest rateStarting at 6.50%
Min. requirements
  • At least two years in business
  • Minimum $250,000 annual revenue
Time to fundingNot disclosed
Pros
  In-person customer service (if a branch is near you)
  Occasionally offers reduced introductory rates and waived fees


Cons 
  High fees (outside special promotions)
  Not ideal for startups

Bank of America offers secured business loans and lines of credit. While interest rates are low, you must pay an origination fee of 0.50% of the total loan amount for term loans, and at least $150 in upfront and renewal fees for a business line of credit. Going with a traditional bank has certain advantages, such as access to savings accounts, personal loans and in-person support.

Startups would need to look elsewhere since this bank requires a minimum of two years in business plus at least $250,000 in annual revenue to qualify.

Read our review

Funding Circle: Best for business term loans

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Loan amounts$25,000 to $500,000
Term length6 months to 84 months
Est. interest rate11.29% to 30.12% for term loans
Min. requirements
  • Two years in business
  • Personal credit score of 660+
Time to fundingOne to five business days
Pros
  Dedicated account manager to help your business succeed
  Fast funding times


Cons 
  Not available in Nevada
  Not ideal for startups

Funding Circle offers a secured term loan ranging from $25,000 to $500,000. If approved, you could receive funds within one to five business days. Additionally, Funding Circle has small business loans for women and minority business loans. However, you must have a personal credit score of 660 or higher and a minimum of two years in operation to qualify.

Read our review

PNC: Best for business lines of credit

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Loan amounts$100,001 to $3,000,000
Term lengthRevolving
Est. interest rateVariable, based on the Prime Rate
Min. requirements
  • Three years in business
  • Personal credit history of at least five years
Time to fundingNot publicly disclosed
Pros
  A traditional bank with various finance products
  Monthly interest-only repayments (no defined term)


Cons 
  Lack of transparency about rates and fees
  Long time-in-business requirement

PNC offers a secured business line of credit for $100,001 to $3,000,000. You’ll need to make monthly interest-only payments but can repay the principal at your own rate. However, it’s best to repay the principal as fast as possible to avoid extra interest charges. Collateral can include non-real estate business assets.

Read our review

National Funding: Best for equipment loans

National Funding logo

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Loan amounts$5,000 to $150,000
Term length24 to 60 months
Est. interest rateStarting at 4.99% simple interest
Min. requirements
  • Six months in business
  • FICO Score over 650
Time to funding24 hours
Pros
  Quick funding times
  Short time-in-business requirement


Cons 
  Not ideal for purchases over $150,000
  Annual revenue requirement not publicly disclosed

If you need to buy or replace equipment for your business, National Funding offers equipment financing up to $150,000. It’s an excellent choice for those with low or bad credit since the minimum credit requirement is 650. However, you may need to look elsewhere if you need to cover purchases over $150,000.

Read our review

SBA 7(a) loans: Best for long terms

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Loan amounts$25,000 to $5,000,000
Term lengthUp to 300 months
Est. interest rate
  • Variable: Prime rate plus 2.25% to 4.75%
  • Fixed: Prime rate plus 5% to 8%
Min. requirements
  • U.S. businesses that have been in operation for around two years
  • Recommended FICO Score of 680
Time to funding60 to 90 days, may vary depending on the lender
Pros
  Capped interest rates
  Long repayment terms


Cons 
  Long processing times
  A high credit score is usually required

The U.S. Small Business Administration (SBA) works with traditional banks and alternative lenders to guarantee loans for eligible small business owners. An SBA-backed loan minimizes lender risk, thus allowing borrowers access to capital when they’re ineligible for traditional funding. SBA-secured loans start at $25,000 (amounts lower than this don’t require collateral). Note that it’s recommended to have a FICO Score of 680 or higher to improve the likelihood of approval.

Learn more

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 is another form of property for collateral. 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, because 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.

Pros and cons of secured business loans

ProsCons

  Easier to qualify for: Collateral typically allows the lender to be more lenient about requirements.

  More favorable terms: Lenders typically provide longer terms and possibly lower interest rates

  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 loan can take longer to fund.

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

7 types of secured business loans and financing options

SBA loans

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AmountUp to $5 million
Interest rate for 7(a) loans
  • Variable: Prime rate plus 2.25% to 4.75%
  • Fixed: Prime rate plus 5% to 8%
TermsUp to 25 years
Typical requirementsCollateral isn’t required for loans under $25,000 

SBA loans provide lower interest rates and funding up to $5 million through the 7(a) loan program for business owners with good credit. The SBA partners with lenders to help small business owners purchase equipment, real estate or working capital.

Business term loans

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Amount$25,000 or higher
Interest rateStarting at around 6.5% APR or higher
Terms6 months to 20 years
Typical requirements
  • FICO Score of 600 or higher
  • Typically two years in business
  • Annual revenue requirements (varies by lender)

You can cover a range of business needs with business term loans, from day-to-day gaps to financing growth and expansion. Both traditional banks and alternative lenders typically offer business term loans, but the main differences between the two types of lenders are the interest rates and eligibility requirements.

Traditional banks tend to offer low rates with high eligibility requirements, whereas online lenders usually have higher interest rates and lower eligibility requirements.

Equipment financing

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Amount$5,000 to $1 million
Interest rate for 7(a) loansTypically 3.49% to 28%
Terms1 to 25 years
Typical requirements
  • Six months in business
  • 550 credit score
  • 20% down payment

You can use equipment loans to finance business equipment, including commercial vehicles, large printing machines and heavy equipment like bulldozers. Equipment loans use the equipment you plan to purchase as collateral. They are typically fast to fund and may require a down payment of up to 20%.

Business line of credit

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AmountUp to $10 million
Interest rateTypically ranges from 2.0% to 29.90%
TermsTypically 6 to 18 months
Typical requirements
  • Six months in business
  • Credit score of 600
  • Monthly revenue of $10,000

New businesses may want to consider a secured business line of credit. Business lines of credit can be a helpful financing option if you want the flexibility to withdraw as little or as much as you need.  Similar to a business credit card, you’re only obligated to repay the amount you use (plus interest). They also help new businesses cover unexpected financial expenses without needing to make multiple credit inquiries.

Commercial real estate loans

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AmountUp to $5 million
Interest rate2.2% to 18%
TermsUp to 25 years
Typical requirements
  • FICO Score of 680 or higher
  • Proof of business assets
  • Steady financial history
  • Required time in business (varies by lender)

A commercial real estate loan can be used to purchase a stand-alone building, a new office space or to build an addition to your existing area. As long as you use the potential property primarily for your business, it falls under the category of commercial real estate.

Invoice financing

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AmountUp to 97% advance on your unpaid invoices
Factor rateFactor rates starting from 1.12
TermsBalance is due when the client(s) pay you
Typical requirements
  • Three months in business
  • 530 credit score
  • Minimum annual revenue of $100,000

With invoice financing, your invoices act as collateral for a line of credit based on your company’s average invoice volume. Businesses can draw on the line of credit when they need additional cash to meet expenses. You’ll typically need strong credit and cash flow to qualify.

Inventory financing

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AmountVaries, up to 80% of inventory value
Interest rateVaries, based on inventory value and business risk
Terms12 months or longer
Typical requirements

If you have unsold inventory sitting on your shelves, you may be able to leverage your inventory as collateral with inventory financing. Inventory financing is typically a short-term credit line that can be used to cover seasonal fluctuations and cash flow gaps. You’ll typically need strong credit and have to deal with higher interest rates than alternative options.

Compare secured business loans

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

LenderBest forMinimum credit scoreLoan amountTime in business
Bank of AmericaEstablished businessesNot disclosedStarting at $25,000Two years
Funding CircleBusiness term loan660Up to $500,000Two years
PNCBusiness line of creditNot disclosedUp to $3,000,000Three years
National FundingEquipment financing650Up to $150,000Six months
SBALong loan terms680 (recommended)Up to $5,000,000Typically two years

How we chose our picks for best secured business loans

Lenders featured on our list of best secured business loans were selected based on the type of loan product, interest rates and terms and general eligibility requirements.

The loan providers included in this review meet the following criteria:

  • FICO Score of 600 or higher, or not specified
  • Time in business of six months or more
  • Funding options above $5,000

Secured vs. unsecured business loans

An unsecured business loan is financing that doesn’t require collateral to borrow. 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 secured and unsecured 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 lowered riskTypically higher interest rates because collateral mitigates the risk to lender
Credit scoreLenders may be more lenient on credit scores with the additional security of collateralLenders tend to have high credit score minimums without collateral

Secured vs. unsecured: Which is right for my business?

Deciding between secured and unsecured business loans comes down to the funding amount you need, your credit score, how fast you need funding and willingness to put specific business assets as collateral.

A secured business loan can help you get more funding with a lower credit score, but an unsecured loan can be faster and doesn’t require a specific asset for collateral.

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 somewhat longer to get your funds.

Getting a startup business loan may be more challenging because of minimum time in business requirement, but lenders are typically more 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 can vary based on the lender. 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.

 

Compare Business Loan Offers

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