Secured Commercial Loans
What are Secured Commercial Loans?
Secured commercial loans differ from u nsecured commercial loans in that the risk is offset, or secured, against the business premises or residential property owned by company Directors. For this reason, secured business loans are usually cheaper than their unsecured equivalent.
In many ways a secured loan is similar to a commercial mortgage, however there are some fundamental differences, and reasons to use this type of product rather than undertake a commercial re-mortgage.
- Short term commercial lending option
- Stands as a 2nd charge over the mortgaged property
- Cheaper than a bridging loan
- Transactions complete very quickly
Important:
If a company or an individual secures finance against either its premises or the homes of its directors, and subsequently fails to keep up the loan repayments, the loan can be called in.
In this instance the premises offering the security may be repossessed by the lender.
When to Take a Secured Loan
Secured business loan facilities are useful if money is required quickly to ease cash-flow, or to purchase urgent business assets.
These loans can be a cheaper means of commercial borrowing than a commercial re-mortgage. This is particularly so, if a current mortgage continues to attract Early Redemption Charges, (ERCs), due on early termination of the contract.
Also additional benefit can be obtained in extracting property equity above the Loan to Value (LTV) normally available from commercial mortgage lenders.
How Much Can Be Borrowed?
Secured business loans are very flexible. There are many products, but a typical product profile would look something like this:
- Up to a maximum of 100% LTV
- 5 to 30 year terml
- Rates start from 1.5-2.5% over base
- £5,000 to £500,000
- Self-certified or status based products
- Prime and sub-prime credit
Is Credit Status a Factor?
Secured loans are available to companies/individuals with poor credit histories, but the amount loaned, and interest rate of the loan, will be higher for those with lower credit scores.
The Application Process
The process for obtaining a commercial loan of this type is very straightforward:
- Complete the application form
- A valuation is instructed
- The property value is confirmed
- Contracts are signed
- The money is transferred
The whole process can be turned around in a matter of days and is dependent on how quickly the valuation can be instructed, and how soon the paperwork is returned.
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Commercial Secured Loan Quote
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