Break Free Home Loans are the best mortgage broker in Melbourne with over 20 years of industry experience. We provide lending solutions and advice tailored to your needs. We work closely with clients as trusted advisors and are accessible to clients when needed.
Our brokers work hard at understanding our client’s unique circumstances and helping them overcome common home loan challenges. Whether you’re a first home buyer or an experienced investor, we’ll help you find the best home loan for your situation. Whether you’re self-employed and have trouble proving your income or you’re a contractor or casual worker, we offer solutions for all types of clients’ income sources.
Are you searching for a secured business loan for your business? Break Free Home Instant Loans works with a wide range of secured business loans Melbourne lenders. When you need a finance option that is affordable and time-sensitive, we can help you find a secured loan with a suitable repayment term and interest rate for your needs.
What Is A Secured Business Loan
Getting a secured small business loan is quite similar to the process of obtaining unsecured small business loans. Except, you’ll have a wider option of not only traditional banks and financial institutions but also online and private lenders to choose from. Our experienced brokers can help you understand the benefits and risks of taking secured business loans. We can help you figure out which type of secured finance is most appropriate for your industry and financial situation.
How Does It Work
Small business loans refer to loans provided to a business that is secured by property or assets. The loan can be used by the business to purchase machinery, new premises and just about anything it needs to expand or manage cash flow problems.
What Can Be Used As Business Collateral
Property is the most popular choice when it comes to the cheapest loan security, but it is also common to find other valuable items used as collateral. If borrowers are unable to repay the loan, the lender has the right to sell the asset to recuperate their losses. If the sale proceeds are greater than the unpaid balance on the loan, which is likely, the borrower is entitled to the outstanding funds created from the sale. The following are some of the most frequent options when it comes to your business collateral:
Blanket Liens
A blanket lien is a type of cross collateralisation a lender uses when they want you to pledge more than one asset to secure your business. It is a lien that gives them the right to seize all types of assets that double as collateral owned by the debtor. Theoretically, a blanket lien allows a creditor legal interest in all of the business’ assets in the event of nonpayment.
Property
Many businesses increase their borrowing power by securing their loans with property. Small secured loans are often easily obtained when you have sufficient equity to borrow against. The amount of equity available will determine exactly how much you can borrow.
Inventory
Inventory, vehicles, and equipment make up another popular form of collateral. Inventory financing combines secured lending and short term business loans. Commercial borrowers can use the value of their inventory and other working assets as collateral to secure the financing they need to produce and market their products and services. Inventory can be a good asset for a loan especially when it is liquid and can be easily sold.
Savings
When it comes to liquidity, cash is the most liquid of collateral. A business’ cash savings can be used to secure a loan. Businesses can also opt to offer securities like treasury bonds, stocks, certificates of deposits and corporate bonds.
Invoices
A business can use its accounts receivable asset as collateral on a loan. They pledge their invoice income, usually as a line of credit. When accounts receivable is used as loan security, the lender typically limits the amount of the loan to 70-80% of the accounts receivable outstanding.
What Can A Secured Business Loan Be Used For?
A secured business loan can be used for any number of purposes including:
- Finance business expansions: rather than use internal funds and disrupt your working capital, financing business expansions are typically best done with external funds. Getting a loan will get you a
reliable source of finance which costs you can spread out over a suitable repayment term. If you have a reliable cash flow that is steady enough to take on loan obligations on top of your existing payments, it can be a great choice to offset the exorbitant costs associated with an expansion. - Pay for cash flow shortages: if your business is undergoing revenue or cash flow problems, a short term business loan can help you get the support you need until you get back on your feet. It may be essential for some businesses to obtain this immediate form of financing to remain in business. Some businesses with seasonal income may also find this type of financing useful.
- Fund hiring and staff commitments: as a business grows, it will have to hire new staff and make up for training costs, profitability gaps, recruiting expenses and finance other staff related commitments.
- Finance working capital: you may need to purchase vehicle assets, fund marketing costs and other working capital expenses for your day-to-day operations.
- Purchase inventory: if you’ve been in business for a while, chances are you know which products are most profitable and when. Perhaps, you want to seize a golden opportunity to make extra profits during high sale periods and don’t have the cash on hand to obtain more inventory. A loan can help you increase your stock and secure the profits you want immediately.
- Buying property and real estate: whether it’s a new warehouse, working space or retail premises, buying a commercial property or other types of real estate is one of the most conventional reasons a business chooses to take out a loan.
- Purchase machinery and equipment assets: machinery and other equipment are integral to your production. Financing these costs can be a heavy burden for emerging businesses, or those without much working capital to spare beyond their day-to-day operations. A loan can help you finance the purchase price, delivery, installation, assembly and other costs needed to get the machinery up and running.
What Are The Benefits Of Secured Finance?
Plenty of companies choose secured business and car loans in Melbourne finance options due to their benefits. These include:
Lower Interest Rates
Secured loans often offer competitive interest rates compared to unsecured loans. Lenders are more willing to offer more at lower interest rates because borrowers are deemed less risky with their asset loan security. Commercial borrowers can take advantage of both fixed and floating or variable interest rates. Fixed rates allow repayments to be predictable and more manageable. Variable rates are determined according to market fluctuations and may give you the lowest interest at times, but incurs more risk if this changes. The catch is, that variable loans tend to have more loan features, but you should decide whether they offer you the value you need on a case-by-case basis. Loan interest on secured business loans can also be tax-deductible.
Longer Loan Terms
Rather than having to pay for costs upfront and sacrifice working capital for the purchase outright, businesses can pay in instalments over the life of their loan. Of course, a cost of borrowing exists in the form of interest rates, but these too can be worked out to your advantage. Choose a suitable loan period to make sure your terms and the amount of interest you pay are suitable for your cash flow. This refers to both the length of time you can budget your loan obligations into your existing income and expenses, and the amount of repayments you can afford. Make sure you are able to make payments on time according to your repayment schedule to avoid damaging your business credit.
Easy To Get
Furthermore, when a business has a steady revenue stream and a good business history, they can usually qualify for financing. Secured loans are known to have a good approval rating due to this reason and how they are secured using assets to minimise risk to lenders. A business may also earn some tax rebate on their loan interest.
Secured vs Unsecured Business Loans
Secured business loans tend to offer more flexible, longer loan terms than unsecured business loans. With an asset as collateral, lenders view secured loans as lower risk and thus will offer lower interest rates to commercial borrowers. Because of the guarantee provided, they also will be more lenient with your credit profile. With unsecured loans, lenders will rely exclusively on your credit history and will demand a stricter borrowing criteria to qualify. By providing security, a business should also receive a higher loan amount than they would if they chose an unsecured loan. This is often necessary if you need to finance major purchases and smaller loan amounts aren’t adequate.
Things To Know About Financing For New Business
These are some general requirements to qualify for secured business loans in Melbourne:
Asset
Private lenders will check your eligibility for their loan based on the asset you offer and your business’ credit history. Your asset needs to provide substantial value so that if you happen to default on your loan, the lender has something to fall back on to make up for the costs. You can use property, working capital and other tangible assets as collateral. When you put up an asset as loan security, you will qualify for better interest rates, loan periods and repayment terms.
Business History
Lenders will look into your business history to determine your creditworthiness. They typically need you to have been in operation for two years. You will often be asked to provide proof of your income through profit and loss statements, cash flow statements and other documents. They will also ask to see your most recent tax returns to see if your business has been fiscally responsible.
Financial Strength
You need to provide your balance sheet and other financial statements. This way, lenders can verify your assets and liabilities, and determine if you are financially secure enough to afford their loan.
Contact Us
Work with brokers from Break Free Home Loans. We’re experts in commercial lending and can help your business get the finance it needs. Talk to us today to discuss your needs. We have the experience to build a strong case for your loan approval. Our expertise is finding a loan product to suit your goals and financial situation. We can help you compare different lenders and submit a loan application that addresses all eligibility criteria.
Frequently Asked Questions
These are some of our most frequently asked questions:
What Is A Secured Business Loan?
A secured business loan is a loan a business can use to finance their expenses. They need to offer an asset to borrow against known as collateral. Lenders will accept property, working capital, inventory, receivables, stocks and other assets worthy of value. With this loan security, lenders can offer borrowers a higher borrowing amount, lower interest rates and more flexible repayment terms. However, if the borrower defaults on the loan, the lender is entitled to selling the asset.
What Is Needed To Secure A Business Loan In Melbourne?
What can you use as collateral for a business loan? Real estate, equipment, inventory and vehicles are popular forms of collateral. Generally, any tangible asset that has good value can be used as loan security.
Can Business Loans Be Secured By Property?
Yes, property is a very common asset businesses use as collateral. It typically gives the highest value to lenders and as a guarantee, can help borrowers secure higher loan amounts.
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