Since the 2008 US mortgage crash the business finance sector has seen major changes. While the traditional high street banks have taken a step back and introduced a more risk-averse stance, this has led to the emergence of private banks, challenger banks and peer-to-peer funding platforms. Business loans are now readily available where the borrower is able to present an array of assets as collateral against a secured debt.
What is a secured business loan?
Historically, as high street banks had a stranglehold on the industry, many businesses were forced to put up either business assets or personal assets as security against loans. This gave the banks an insurance against potential default further down the line. However, in the current environment the high street banks have taken an even more risk-averse approach and do not allow certain types of security.
As a consequence we have seen challenger banks, peer-to-peer funding platforms and private banks/private equity providers step in to fill this void. These fund providers are more flexible with regards to the type of assets that can be used and deal structures. They will look at the broader picture of a business/individual’s financial circumstances, income streams and worldwide assets. The opportunity to mould a particular loan package around the circumstances and income of the business should not be underestimated.
Such is the growing influence of alternative business loan providers that many high street banks are directly funding these companies with capital. By providing capital they have no hands-on management role with the business and simply work on investment returns.
Secured business loans based on your business assets
The more traditional business assets used as security for business loans include:-
- Business property (or personal property)
- Investment accounts
- Specialist machinery
- Business inventory
Individual secured business finance providers may also take into account other assets such as:-
- Personal vehicles
- Valuables such as jewellery and collectables
- Savings accounts
- Investment accounts
- Insurance policies
The type of asset taken into account for a secured business loan will vary between individual lenders. What we have seen is that the high street banks take a more cautious approach and niche players tend to be more flexible.
While the headline figures may often suggest that high street banks are more “competitive” these tend to be off-the-shelf packages which are not always suitable for individual clients. Those business loans which are moulded around a client’s particular requirements and financial circumstances can attract a slightly higher headline interest rate and often involve varying types of debt.
Secured loans: considerations
Over the last decade we have seen major changes in the way in which secured business finance is negotiated and provided. This market is extremely liquid in terms of both new applications and the refinancing of business debt. However, there are various secured loan considerations to take into account, aside from actual security, which include:-
- Size of the business
- Financial strength
- Credit history
- Reason for the finance
- Business plan
- Cash flow
- Exit route
The business world moves extremely quickly, trends change and many opportunities require access to immediate finance. In many ways this has led to the high street banks being left behind, less nimble footed and unable to compete directly with some of the niche market players.
Call us today for a no obligation chat
Here at Enness we have access to hundreds of traditional and non-traditional business finance providers. Our independent status means that we are not tied to any individual operators and therefore we can scour the market for the best deals. In the past we have negotiated business finance where there appeared to be a lack of acceptable security. We have a reputation which goes before us, a negotiating team working for you and a history of finding solutions to often complex situations.
Give us a call today and we can walk you through the options, actual interest rates available and create a number of business finance packages moulded around your particular needs. We are extremely confident we can find a solution to even the most complex of situations.