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June 7, 2019 / By Jared Cohen

Different Types of Secured Business Loans

Secured business loans are a common form of business financing. They are types of business funding that are secured by personal guarantee like valuable assets that acts as collateral. You essentially promise the lender that you will repay the loan within the stipulated time. However, if you are unable to repay it, the lender reserves the right to recover the amount through the collection of collateralized assets or personal guarantee. Overall, secured business loans are among the best funding options available to businesses. Below is a discussion of the types of secured business loans.

Traditional Term Loans

Traditional term loans are sometimes referred to as medium-term loans. These are among the commonly used secured business loans. These loans are comparatively straightforward. The business borrows a sum of money, which should be paid back along with interest. This should be completed within a duration allowed to them. Although it is possible to get a medium-term loan from online lenders, banks are the usually frequented place for traditional loans.

Banks usually request you to offer security in the form of collateral. You should be ready to offer vehicles, savings, equipment, or real estate holdings for this type of secured business loans.

SBA Loans

Among secured business loans, SBA loans are a good financing choice for small business owners. There are three different programs offered by the SBA which are the Microloan Program, the CDC/504 Loan Program, and the 7(a) Loan Program. These loans are not directly offered by SBA. Instead, these are business loans which have been guaranteed by the SBA.

SBA stands in as the guarantor of the loans. They guarantee a proportion of the loan in order to motivate the lenders to finance small businesses by offering incentives. It is beneficial for both lenders and business owners. Lenders risk less and businesses can avail larger loans which they would not have qualified for otherwise.

Business Lines of Credit

Business line of credit is another option under the secured business loans. This works similar to a credit card. Businesses are given a pool of funds which they can draw from upon need. Later they only have to pay back what they used. After the business repay the amount, their account gets refilled to the initial amount by the lender. There are options to use secured and unsecured lines of credit.

Above discussed are some of the different types of secured business loans. Each has its own benefits and downsides. Make sure you understand them properly before you choose one of these to help your businesses.

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