How to borrow Secured Business Loan in Delhi NCR ?

Secured Business Loan is a loan that requires a collateral. Collateral is assets that the lender uses to secure the repayment of the loan. If a company defaults on its loan, the lender has the right to forfeit the collateral to compensate for its loss. Examples of collateral include residential/commercial/industrial property or equipment etc.

How to Secure a Business Loan ?

To secure a business loan, it is offered to a business or personal asset that can be easily converted into cash. Following are some examples of assets that can be used to secure a loan :-

1. Property :- Secured Business Loan include items such as personal real estate such as property, cars or motorcycles.
2. Equipment :- Tools that are used to operate a business, such as machinery.
3. Savings :- Money lying in savings account or Certificate of Deposit.
4. Inventory :- Some lenders allow inventories in stock to be used as collateral. It is usually between 60% and 80% of the value of goods.
5. Invoices :- With invoice factoring, borrowers can receive advances on their outstanding invoices. These invoices are then used as collateral to secure the loan.
6. Investments :- Stocks, Bonds or Mutual Funds.
7. Personal Guaranty :- The signer of the personal guarantee is personally responsible for repaying it through personal property in the event of default on the business loan.

Advantages of secured business loans

1. Easy to Qualify :- Offering collateral reduces the lender’s risk thereby increasing the chances of getting a loan. A Secured Business Loan for poor credit leads the way in loan financing and provides an opportunity to rebuild their credit score.
2. Better Terms :- The lower the lender’s risk, the easier the borrower gets the terms of the loan. It is possible to obtain large amounts of financing with long repayment periods at a lower interest rate to those who have valuable collateral.
3. Flexibility :- A Secured Business Loan for a newly started business provides an opportunity to hold personal assets as a way to cover startup costs.

Disadvantages of Secured Business Loan

1. Loss of Collateral :- In the event of default in a Secured Business Loan the risk of losing the collateral to the loan is high. This is a risk that all business owners must weigh before deciding to take out a Secured Business Loan.
2. Funding Takes Longer :- In a collateral loan, since the lender has to evaluate the value of your collateral, it can take longer to get money from a secured loan than from an unsecured loan.

Top 5 Secured Business Loan

1. Term loan :- Most banks and NBFCs offer term loans. Short-term loans typically provide between 9 months to 5 years with repayment terms. Long-term loans can be obtained by pledging commercial assets such as real estate, equipment and vehicles, which can be up to a maximum of 15 years.

   The eligibility required for a term loan varies by lender and loan amount, but most lenders will seek a solid credit score, one to two years operating history, strong revenue and cash flow.

2. Equipment Loan :- Equipment Loan is a loan that is provided with collateral to the equipment when purchasing equipment (machinery, vehicles, etc.). If the borrower defaults on the loan, the lender may seize the equipment purchased by the borrower with the loan and sell it to make up for its loss.

   To qualify for an equipment loan, some conditions of the lender such as credit score, time in business and money requirement have to be mentioned. The repayment terms usually range from three to seven years.

3.  Invoice Financing :- Invoice financing allows your business to access the funds tied up in unpaid invoices by selling those invoices. The finance company or Bank then pays a fixed amount of unpaid invoices (usually 70% to 90%) in advance and charges in lieu of the advance payment. The total loan is repaid as soon as the invoice is filed. To qualify for an equipment loan, some conditions of the lender such as credit score, time in business and money requirement have to be mentioned.
4. Inventory Financing :- Inventory financing allows loans to be used to collateralize their current inventory. Most lenders charge interest rates weekly or monthly. To qualify, applicant will need a personal credit score of at least 650. Lenders also need to have at least six months of business history on the books. Loan terms typically last from three to 18 months.
5.  Commercial Property Loan :- Commercial Property Loan is similar to personal mortgages when it comes to collateral. Instead of pledging something that is already owned, the real estate being purchased with the loan proceeds serves as the collateral. This means that if the business owner defaults on the loan, the land or building can be seized by the lender and sold to pay off the debt.

Required Documents for Secured Business Loan