What is secured
Business Finance

In today's competitive business landscape, securing the necessary funds to fuel growth and expansion is crucial for success. One viable financing option that provides stability and flexibility is secured business finance. By leveraging assets and collateral, businesses can access the capital they need while minimizing risk. In this article, we will explore the benefits and considerations of secured business finance and how it can empower businesses to achieve their growth objectives.

Understanding Secured Business Finance

  • Definition

    Secured business finance refers to a financing arrangement in which a business pledges collateral, such as real estate, equipment, or inventory, to secure a loan or line of credit

  • The role of collateral

    Collateral acts as a form of security for the lender, reducing their risk and providing assurance of loan repayment

  • Types of collateral

    Common types of collateral include property, inventory, accounts receivable, and equipment. The choice of collateral depends on the nature of the business and the lender's requirements.

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Benefits of Secured Business Finance

  • Access to higher loan amounts: By offering collateral, businesses can typically secure larger loan amounts compared to unsecured financing options
  • Lower interest rates: Secured business finance often comes with lower interest rates due to the reduced risk for lenders.
  • Longer repayment terms: Lenders may offer more extended repayment periods, providing businesses with increased flexibility in managing their cash flow
  • Easier approval process: Securing a loan with collateral can simplify the approval process since lenders have tangible assets to mitigate their risk.

Choosing the Right Lender

Secured business finance offers a viable solution for businesses seeking capital to support their growth objectives. By understanding the benefits, considerations, and available options, businesses can make strategic financing choices that propel them toward success. Whether it's funding expansion plans, investing in new equipment, or optimizing cash flow, secured business finance can be a valuable tool in achieving sustainable growth

Research and compare lenders

Evaluate multiple lenders to find the best fit for your business, considering factors such as interest rates, repayment terms, and flexibility.

Seek professional advice

Consulting with financial advisors or industry experts can help you navigate the selection process and make informed decisions.

Common Types of Secured Business Finance

Secured Business Loan

A lump sum loan with a fixed repayment schedule and interest rate, typically secured by assets

Asset-Based Financing

Financing that leverages specific assets, such as accounts receivable or inventory, as collateral

Lines of Credit

A revolving credit line secured by collateral, allowing businesses to access funds as needed

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We at Dealplexus, have the capability to execute difficult and complex debt and equity transactions of financially distressed entities from investors, special situation funds and NBFCs etc. Our deep domain knowledge and research driven approach enriched with experience enables us to make a result-oriented representation to prospective investors.

We offer support in raising the following different types of debt for business

Project Finance

Project finance is that the long-term financing of commercial manufacturing or any other such projects based upon the projected cash flows of the project instead of the balance sheets of its sponsors

Working Capital Finance

A working capital loan is a loan that's taken to finance a company's everyday operations. These finance to buy long-term assets or investments and are, instead, provide the finances that cover a company's short-term operational needs

Equipment Loans

Equipment financing is that the use of a loan or lease to get or borrow hard assets for your business. This sort of financing could be used to purchase or borrow any sort of equipment.

Structured Financing

It is a complex form of financing, used for a large-scale fund infusion. It is beyond the scope of conventional tools like a loan or a bond. Borrowers with higher needs seek structured funding in the form of Collateralized Debt-obligations, Syndicated loans, and Mortgage-Backed Securities

Acquisition Funding

Acquisition financing is that the funding a corporation uses specifically to acquire another company. By acquiring another company, a company can increase the dimensions of its operations and enjoy the economies of scale achieved through the acquisition.

Promoter Funding

A facility provided to promoters of well-managed companies to boost funds against their stake therein operating company. These funds are often utilized for various needs like financing for Acquisitions and take-over financing and business growth. These funding are short to medium-term in nature

Mezzanine Funding

In finance, mezzanine capital is any subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only thereto of the common stock. It is often structured either as debt or preferred shares or another form of quasi-equity

Overseas Funding

Overseas funding refers to a fund that invests in companies outside the country of residence of the investor. These are often also called as international funds or foreign funds. Overseas funding is often through closed-end funds, exchange-traded funds or mutual funds.

Distressed Assets Funding, Interim Finance, One Time Settlement (OTS) Etc

These types of funds are typically temporary or very short term loans provided to tide over a temporary or interim funding shortfall as per requirement and repayment capacity of the borrower.

Frequently Asked Questions

What is a secured business loan?

A secured business loan is a type of loan that requires collateral or specific assets to be pledged as security. The collateral serves as a form of protection for the lender in case the borrower defaults on the loan.

How does a secured business loan differ from an unsecured loan?

Unlike an unsecured loan that does not require collateral, a secured business loan requires the borrower to pledge specific assets as security. If the borrower defaults on the loan, the lender has the right to seize and sell the collateral to recover the outstanding debt.

What types of assets can be used as collateral for a secured business loan?

Various assets can be used as collateral for a secured business loan, including real estate properties, equipment, inventory, accounts receivable, or even personal assets of the business owner. The specific assets accepted as collateral may vary depending on the lender's policies.

How is the value of the collateral decided?

The collateral valuation process involves assessing the value of the assets being used as collateral. This is typically done by an appraiser or valuer, who possesses the requisite skill and professional expertise to value the specific asset. The value of the collateral helps determine the loan amount and the maximum borrowing limit.

What are the benefits of a secured business loan?

Secured business loans often come with lower interest rates compared to unsecured loans. They provide greater security for the lender, which can result in higher borrowing amounts and longer repayment terms for the borrower.

How long does it take to get approval for a secured business loan?

The approval timeline for a secured business loan can vary depending on the lender and the complexity of the loan application. It may involve a thorough evaluation of the collateral and the borrower's financials. The timeline can range from a few weeks to a couple of months.

Can I use existing assets in my business as collateral?

Yes, existing assets in your business can often be used as collateral for a secured business loan. This can include equipment, inventory, accounts receivable, or real estate owned by the business. The specific assets that can be used as collateral may vary depending on the lender's requirements.

What happens if I default on a secured business loan?

If you default on a secured business loan, the lender has the right to seize and sell the collateral to recover the outstanding debt. It's important to understand the terms and conditions of the loan agreement and avoid defaulting on the loan.

How can Dealplexus help me in getting the required finance for my business?

Dealplexus has partnered with numerous banks, NBFCs, Fintechs and Funds who provide a wide variety of business loans to suit the increasing and multiple needs of the businesses. New and innovative solutions have been designed to cater to every type of funding need of all businesses, big or small, trading, manufacturing or service provider. Do write to us at support@dealplexus.com to know how we can help you in securing the best financing solution for your business.

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