What does representative APR mean?

Representative APR (annual percentage rate) is the interest rate that lenders are required to offer to at least 51% of applicants for a particular loan. This rate includes both the interest rate and any associated fees, giving a clearer picture of the overall cost of borrowing. It's important to note that the representative APR is not necessarily the rate you'll be offered. The actual rate you receive may vary based on factors such as your business's financial situation, credit history, and the specific loan terms.

Does a business loan affect my personal credit score?

Whether a business loan affects your personal credit score depends on your business structure and the specific loan you take out. Sole trader: If you're a sole trader, your business is considered part of your personal finances. Therefore, taking out a business loan can impact your personal credit score. Limited company: For limited companies, business loans are typically separate from personal finances, meaning they generally won't affect your personal credit score. However, if your business fails to meet its loan obligations, your company’s creditworthiness may be impacted instead. Personal guarantee: If you personally guarantee a business loan, your personal credit score could be affected. This means that if the business defaults on the loan, you're personally liable for the debt, which could harm your credit rating. Always check the terms of your loan and understand the potential impact on both your business and personal finances.

Can you use a personal secured loan for business purposes?

There's nothing stopping you taking out a standard secured loan on your personal assets then using the money to fund your business. However, in that case it will be your personal assets that are at risk if you don't meet the payments and your personal credit score that is impacted.

How much could my business borrow?

The amount your business can borrow depends on factors like your business assets, financial health, and the lender's criteria. The lenders in this comparison offer loans ranging from smaller amounts to up to £10,000,000, so your borrowing capacity will vary based on your business's specific situation.

Will I need a business plan to apply for a secured loan?

Yes, most lenders require a business plan when applying for a secured loan. A solid business plan helps demonstrate your business's viability, how the loan will be used, and your repayment strategy. It typically includes an overview of your business, financial projections, and market analysis, helping lenders assess your ability to repay the loan. A strong plan can improve your chances of approval.

Are interest rates lower for secured loans compared to unsecured ones?

Yes, interest rates for secured loans are generally lower than those for unsecured loans. Because secured loans are backed by collateral, the lender's risk is reduced, so rates tend to be lower. If the borrower fails to repay the loan, the lender can take steps to seize the asset to recover their money. This reduced risk often results in more favourable loan terms, including lower interest rates. Specific rates depend on factors such as the value of the asset, creditworthiness, and market conditions.

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Who is eligible?What are secured business loans?How to compare What assets can you use as security?How long does it take?Pros and cons Loan example Business loan alternatives FAQs

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What is a secured business loan?

A secured business loan is money you borrow for your business that’s backed by something valuable you own - like equipment, property, or vehicles. These items act as security for the lender, so if you can’t repay the loan, the lender may take those assets to recover their money instead.

Secured business loans can be used for a variety of purposes, including funding business expansion, covering operational expenses, or improving cash flow. The loan amount, repayment terms, and interest rate are agreed upon upfront - and your business repays the loan in instalments over a set period - like with a personal loan.

Because the loan is secured by assets, it may be easier to qualify for larger loan amounts or enjoy more favourable terms compared to unsecured loans - but bear in mind the application process can take longer.

UK businesses that used external finance^[1]

45%

Is my business eligible for a secured business loan?

Your business will have to meet certain lending criteria to qualify for a secured business loan. Providers may look at:

Your business’s annual turnover
Your business credit report
Your type of business
Your trading history

Before applying, check your business meets all the provider’s criteria to avoid having your application refused.

How to find the right secured business loan for you

There are a few things you need to think about before applying to ensure you get the best secured business loan for your needs:

Work out how much you need to borrow

The first step is to know what you actually need. Spend some time on this, as borrowing too much or too little could leave you paying interest for something that doesn't meet your needs.

What assets you have to secure against

Once you know what you need, have a think about what you can use as collateral. Remember, if you can't meet the repayments the lenders could take possession of it.

How long you want to take to repay the loan

Choosing a longer term loan can mean you pay back less each month, but the debt will hang over you for far longer impacting profits. So aim to pay back in the shortest time you comfortably can.

What’s involved in getting a secured business loan?

A secured loan takes a little longer than a credit card or unsecured loan because the lender needs to check the value of what you're offering as collateral, as well as your application.

That means you'll go through a series of steps during the application:

Prepare: Get hold of the necessary documents. These will be things like your accounts, tax returns, a business plan and any financial documents about the assets you plan to secure against the loan.
Research: Take a look at different lenders, loan terms, conditions and interest rates to find the best fit for your needs.
Apply: Decide which provider offers the best deal for you and fill in the application.
First check: The lender decides if it wants to go forward with the deal and what loan amount and interest can be offered.
Evaluation: The lender takes a look at the collateral offered to check it covers the loan amount.
Decision: Once checks are complete, the lender makes a call, either deciding to approve or reject the application.
Outcome: If your loan is approved, you are sent forms to sign and provide the collateral. After that's completed the lender transfers the cash to you.

What assets can you use for a secured business loan?

You can use almost any valuable asset as collateral for a secured business loan, it doesn't have to just be physical items like property or equipment either.

Many lenders also accept non-physical assets such as outstanding invoices, future sales or unsold inventory. As long as the asset has some measurable value, it can potentially be used to secure funding.

Percentage of business loans that are cashflow related^[2]

35%

Here are some of the main assets lenders accept:

Property/land: Much like a mortgage on a home, you can put up any property or land owned by your business as collateral for a loan.
Inventory financing: The computers, machines and materials you use to conduct your business can be used to secure finance - even furniture, appliances and food products count. Commercial vehicles are one of the more common assets typically used here.
Invoice finance: If you have a string of as-yet unpaid invoices outstanding, but need cash now to keep things ticking over, you can use them as collateral to borrow money.

Pros and cons

Pros

You may be able to borrow more, but this will depend on the value of your asset.

Sometimes cheaper than unsecured loans – but not always. This is because there is less risk to the lender as they can claim money through the sale of assets if you can't pay instead.

Longer loan terms are available, which could mean lower monthly repayments. This can help your business' cashflow.

Cons

You need a suitable asset to apply and this can include property, vehicles or machinery. Some businesses might not have access to these assets, making secured loans hard to apply for.

It can take longer to get a loan as you'll need the relevant paperwork for your chosen asset. The lender will then need to make sure they are satisfied before agreeing to the loan.

It puts your business assets at risk as if you can't repay the loan the lender can sell your asset.

Example costs of a secured business loan

Here’s an example of how much a secured business loan could cost and the repayments your business would need to make:

Amount borrowed: £100,000
Collateral: Business machinery
Loan term: 10 years
Interest rate: 30% APR
Monthly repayments: £2,383.33
Total cost: £285,999.60

“By using assets as collateral, businesses can unlock larger loan amounts and better interest rates, while showcasing their ability to manage risk and invest in long-term growth.”

Joe Phelan

Small business expert

Alternatives to secured business loans

Unsecured business loans

Unsecured business finance - whether it's a business credit card, overdraft or traditional business loan - doesn't put your assets at risk if things go wrong. But they might come with higher interest rates or offer less cash overall.

It's always worth checking them out alongside secured options.

Angel investments

Business angels are people who have already made money and are now looking to support the next generation of entrepreneurs.

They'll often ask for a stake in your business - say 10% to 25% - but they can also provide advice and contacts as well as cash.

The biggest problem is finding one, although the Angel Investment Network could be a good place to start.

Venture capital

As well as business angels, there are companies that invest in up-and-coming businesses in return for a stake in them too.

This is a more formalised process, the companies are looking to profit themselves too, but the idea is the same.

You give up a minority stake in your business, they hand over some funding. Tracking one down is, again, a potential issue, although the British Private Equity & Venture Capital Association is a good place to start.

Private equity

Private equity works a lot like venture capital, except the people providing cash in exchange for a stake in your business are a private fund rather than a public one.

This could be a group of people looking after the personal fortune of a family or trust fund for example. It means there might be fewer restrictions on who they offer money to, as it will be in line with a specific person's goals rather than a straight profit motive.

The British Private Equity & Venture Capital Association is a good place to look for investors.

Crowdfunding

Rather than convince a single person or firm to part with a lot of cash, crowdfunding offers the chance to get a lot of people to part for a little.

You can offer rewards in exchange for investments or offer equity in your business, but you might not get anything if you don't hit your funding target.

Seedrs is a decent option if you're interested in equity crowdfunding or there's Indiegogo and Kickstarter for rewards-based crowdfunding.

Business grants

Depending on what you need the money for, you might be able to get a development grant or other type of grant.

There is funding available for environmentally friendly equipment, research and development, regional growth and a lot more.

You can see what's available from the government here, or check out your local council's website.

FAQs

About the author

Joe Phelan

Joe joined the money.co.uk team in 2024, where he helps small business owners navigate the often confusing world of business finance. His role is to cut through the jargon and create clear, actionable content that empowers entrepreneurs to make confident financial decisions.

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References

1.External finance usage remains steady across the UK, as optimism grows among small businesses British Business Bank

2.Money UK Business Loan Statistics 2025 Main reasons SMEs take out loans