LoanAgainst offers secured loans for small businesses that use a physical asset as collateral. These are usually assets of high value, such as vehicles.
The loan is secured by the asset, so the loan amount is determined by the market resale value of the asset.
In this article, we cover:
- what a secured small business loan is
- how secured loans help small businesses
- when to consider a loan for your business
- alternative options for getting a small business loan
- secured small business loans from LoanAgainst.
What is a secured small business loan?
A secured small business loan uses a physical asset as collateral on a short-term loan. Short-term loans usually have a repayment period of six months to a year. Depending on the type of loan, it can be as little as one month.
Secured loans differ from unsecured loans that use other factors, such as credit history or the business’ current financial statements, to determine if a loan should be approved.
With a secured loan, the amount is determined by the current market resale value of the asset. This means the asset is sold if the borrower defaults on the loan.
This enables a business to get a loan without submitting financial statements and business plans.
How our secured loans help small businesses
Small businesses often need a business loan to give them a kick-start. Encountering financial difficulties is common for small businesses and a short-term loan can be a sensible way to overcome these challenges.
Below, we look at some case studies of businesses that have used secured business loans to tackle financial issues.
Top gear tech
David has a great idea for a tech start-up that offers web and app development to NGOs at discounted rates. He plans to subsidise the costs with investments and donations from large corporate companies.
His start-up would need a lot of technology to get it up and running, not to mention the time and money needed to pitch his concept to investors. The idea is solid but without starting capital, it will never get off the ground.
Luckily, David owns a Ferrari, his dream car, and now also the key to his future success. A loan against his vehicle gives him the money needed to get his business off the ground.
When he secures his first investors, he repays the loan and keeps his dream car.
A catering conundrum
Anathi has a catering business that she has been successfully running for three years. She started the business during lockdown and has been cooking in her home kitchen.
Word is getting out about her delicious food and good service. Potential clients are contacting her for quotes and the business is getting too big for her to manage alone in her small home kitchen.
Fortunately, Anathi has a set of diamond earrings and a necklace that she inherited from her grandmother. She uses the jewellery to get a loan so she can rent a catering kitchen when needed and hire an extra cook.
With the boost in business, Anathi repays the loan. Her heirlooms are returned, in the same condition she left them – and can be passed on to future generations.
Building rubble and trouble
Dumisani has a successful contracting business. He has enough to buy supplies, pay his workers and keep business ticking over. Saving up for unexpected expenses isn’t an option yet.
In the middle of a lucrative job, his digger loader breaks down. This expensive machine is vital to complete the job and his future business hinges on it. He must get it fixed quickly.
Dumisani owns other machinery, including a truck that’s not currently being used. This truck stands collateral on a short-term loan, so he can get his digger loader up and running.
Once he gets paid for the completed job, he repays the loan and his truck and digger are ready for the next job.
When to consider a loan for your business
A secured loan for your business makes the most sense when there is a temporary cash-flow issue – and you know you will be able to repay the loan within a few months.
Secured loans also work well when there’s an unexpected and never-to-be-repeated opportunity to grow or invest. For example, machinery that would improve your profits is being auctioned at an excellent price.
On the other hand, there are times when it would be a bad idea to get a secured loan. These include:
- paying off business debt (except for consolidation)
- when the business relies on the collateral asset
- if you can’t pay it back within a few months
- to prop up a failing or unprofitable business.
Alternative options for getting a small business loan
Most big banks offer small business loans. These loans are usually unsecured, meaning they don’t use an asset. However, they require you to submit business plans, financial statements and usually involve your credit history.
There are various government options for funding, including grants, incentives and equity funding through government agencies.
Some examples include:
- Industrial Development Corporation
- Small Enterprise Finance Agency
- Department of Trade, Industry and Competition
- National Empowerment Fund.
Secured small business loans from LoanAgainst
At LoanAgainst, we offer asset-based secured loans for small businesses in South Africa.
You can use a range of personal assets to secure a short-term loan, including vehicles, luxury watches, jewellery, gold and art.
With a secured loan from LoanAgainst, you are guaranteed:
- money in your account within 24 hours
- a quick and discreet application process
- no credit checks
- no effect on your credit score
- competitive rates and NCR compliance
- no hidden fees or penalties.
Apply online or contact our call centre on 067 115 3453 or 079 726 4690 for asset-based, secured loans for small businesses from LoanAgainst.