Often referred to as a traditional loan, a secured business loan is a loan made by a bank or finance company where the lender requires the borrower to pledge assets as collateral against the loan. Collateral can take the form of property, a large piece of equipment or vehicle, savings, inventory or personal assets. Should the borrower default, the bank or lender may sell the asset to recover the amount owed. Because of the reduced risk for the lender, businesses that are able to pledge collateral often find that secured business loans are the least expensive form of finance.
According to the Australian Banking Association, 29% of small business have outstanding property loans or other long-term loans, second only to credit cards at over 50% of small businesses.