Here are six steps to get a secured business loan.
1. Calculate how much you need
Review your business budget to estimate what you need to cover essential purchases for your company. Also take into account whether you need the funds all at once or spread out over time. Although secured loans typically offer lower interest rates, you could end up paying more if you opt for a longer repayment term.
2. Evaluate your business qualifications
Review each lender’s general business loan requirements online, such as minimum credit score, annual revenue and collateral requirements. While alternative lenders typically have more lenient qualification requirements for secured business loans, you’ll likely pay higher rates than with traditional financing.
It’s a good idea to check your credit scores before applying to know your eligibility options. Boosting your credit score in advance could help you qualify for more competitive offers.
3. Choose your collateral
Collateral requirements vary by lender and loan type. In general, you could pledge equipment, real estate, invoices or financial assets as collateral for business loans. If you can’t meet the lender’s collateral requirements, you may want to consider unsecured business loans instead.
4. Compare secured business lenders
You can apply for secured business loans via traditional banks, credit unions or online lenders. Pay attention to hidden fees since these extra costs can jack up the overall cost of your loan. Also, make sure the lender reports on-time payments to the major credit bureaus so you can keep building your business credit.
You can read small-business lender reviews before applying to find the best options for your needs.
5. Gather required documents
Lenders typically require certain documents during the application process. While the exact documents will vary, here’s a general idea of what you’ll need:
6. Apply and review
Most secured business loan applications can be completed online, but some lenders might require a phone call or in-person visit. Secured business loans typically take longer to approve and fund since the lender must review your assets. For example, it can take months to receive your funds after being approved for an SBA loan, although you can reduce this timeline to two weeks by working with an SBA-preferred lender.
Make sure to review all loan offers to ensure you understand the rates, repayment term and additional fees.