All About Secured Business Loans

All About Secured Business Loans

Written by Kale Havervold
Fact-checked by Caitlin Wood
Last Updated November 23, 2021

When it comes to owning and operating a business, the goal is to grow over time and make more money. However, running and operating a business isn’t always cheap and you’ll need money for a variety of costs. Whether you are just starting out, are trying to buy more equipment or expand in another way, one thing is clear. You’ll need money to get it done.

While it would be nice if there was a money fairy that could come sprinkle some extra cash on the businesses that need it most, that isn’t the case. If you want extra funds for your business you need to do it in the form of a loan. Specifically, a secured business loan.

With that in mind, this article will take an in-depth look at secured business loans, at what they are, how they work, what kinds exist, their pros and cons, and more.

Do you have bad credit? Here’s how you can get a small business loan.  

What Are Secured Business Loans and How Do They Work?

So, what exactly is a secured business loan?

Well, a secured business loan is similar to any other business loan, except for the fact that you put up your business or some of its assets as collateral. Essentially, collateral is something that a potential borrower will offer their lender in order to secure the loan. So if a farming company needs a loan, they might put up a tractor as collateral. Then, if they default on the loan, the lender will seize the tractor to recover their loss. That’s right, if you don’t pay back the loan, you run the risk of potentially losing your business or your asset, so be sure to think long and hard before securing a secured business loan.

Want to learn about rural mortgages? Click here.

The reason people opt for a secured business loan is that they often have better rates and terms. For example, a company is willing to give you lower payments, a longer term, and a lower interest rate when there is some form of collateral involved. This eliminates a lot of the risk for the lender because if you don’t repay the loan, they get some of your business or the assets you own as compensation.

So, if you are confident you will always be able to repay the debt (and not lose the collateral you offered up), then a secured business loan is a good idea. As long as you make your regular payments on time and in full, a secured business loan is just like any other loan.

What Types of Secured Business Loans Are There?

The term “secured business loan” is actually a fairly broad term, as there are several different kinds. There are business equity loans, secured term loans, and equipment loans. We will now take a closer look at each of these types of secured business loan.

Business Equity Loans

A business equity loan is a secured business loan in which the borrower is allowed to use a part of their business as collateral. The amount of the business that is up for grabs, in the case of non-payment, will depend on the terms you agree to. Generally, if your credit is not the greatest, you may have to give up a large portion of your company. Also, you are just putting your company assets at risk, not your personal assets, so there is no worry that they will take your home or your car.

For the ins and outs of business credit, check this out.

Secured Term Loans

This type of secured business loan involves money that is borrowed from a lender or bank and is paid back on a specific payment schedule. Lenders will often allow for a wide variety of things to be used as collateral including inventory, land, buildings, accounts receivable, etc. Therefore, while they are similar to business equity loans, you do not have to put up the actual business as collateral, so there is a bit more flexibility with this type of secured business loan.

Equipment Loans

This type of secured business loan is used exclusively for a company that needs to buy new equipment. Essentially, you’ll apply for a loan to get the piece of equipment you need, and if you are approved, the equipment becomes the collateral. So, once you make all the payments, you will own the equipment. However, before that point, if you default, your lender can seize the equipment, since they still technically own it.

For more information about using assets to secure funding your business, click here.  

How and Where to Get Secured Business Loans?

So, this all sounds great, but where can you get a secured business loan? Thankfully, since these loans are fairly popular, there are a number of different ways to get them. Banks, credit unions, and a variety of other companies are able to provide them for you and you should have little to no problem securing one.

Perhaps the easiest and most convenient way to get a secured business loan is to use an online lender, like Loans Canada. Thanks to recent advancements in technology, getting a secured business loan is easier and simpler than ever. Of course, you should still do some independent research on your own and consider all options to see what works best for you. Also, be wary of scams and loans that seem “too good to be true”. Secured business loans are serious stuff, and you should always make sure you go with a company or lender that you are comfortable with and know is legitimate.

What else do you need to get a small business loan? Read this for more information.

Pros and Cons of Secured Business Loans

Now that you’ve started to learn the basics of secured business loans, including how and where to get them, and how they work, let’s go through some of the general pros and cons of these loans.


  • Because these loans are secured, you can generally get much lower interest rates, a better loan payment schedule, and can often qualify for a larger loan than if you were trying to get an unsecured loan.
  • They provide one of the fastest and most convenient ways to get a lot of money quickly if you are starting or growing your business.
  • Secured business loans often can have a much longer repayment period, which will lower the amount you pay every month, making these loans easier to maintain and pay off.
  • Because you are offering collateral, secured business loans are easier to be approved for and even with bad credit, there is a good chance you will still qualify (but may need to put up a bit more in terms of collateral).

Click here to learn the difference between a merchant cash advance and a business loan.


  • Of course, the biggest negative of these loans is that if you are not able to pay yours off, you will lose either a part of your business or assets that you own.
  • While the interest rate will likely be lower than that of an unsecured loan, they can sometimes have variable rates, which can lead to fluctuating payments.
  • Just as the long repayment period is a pro (as it allows for smaller payments), it can also be a con as it means you are in debt for a longer period of time.
  • Because of how easy secured business loans are for most people to obtain, some borrowers may over-do it a bit by borrowing much more than they need, and then are unable to keep up with payments.

Can you get a business loan based solely on an idea? Find out here.  

Being Responsible With Your Secured Business Loan 

In the end, secured business loans can be a great thing if you are capable of being responsible and paying them back on time and in full. However, like with any type of loan, they may not work out well if you often have trouble managing your debts properly. Hopefully, this article has introduced to you the topic of secured business loans and has given you the information necessary to decide if a secured business loan is right for you. Also, remember, that a sudden influx in funds doesn’t automatically make your business more successful, so you should have solid plans for the borrowed money before you even get it.

Looking to Apply For a Business Loan?

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In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post,, and Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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