A secured loan is a loan backed by collateral, such as property, equipment, or other assets, that the lender can claim and sell if the borrower does not repay. The security reduces the lender's risk and is the defining feature of the loan.
General information, not financial, legal, or tax advice. Verify current terms and eligibility with the provider before applying.
How a secured loan works
A secured loan is borrowing that is backed by an asset pledged as collateral. The borrower grants the lender a legal claim, often called a charge or a lien, over a specific asset such as commercial property, vehicles, equipment, or receivables. If the borrower fails to repay under the agreed terms, the lender can enforce its claim and sell the asset to recover what it is owed. Because this security lowers the lender's risk, secured loans can offer larger amounts, longer terms, or lower interest rates than comparable unsecured borrowing, although the actual terms vary by lender and by the borrower's circumstances.
Secured compared with unsecured borrowing
The defining difference is collateral. A secured loan is tied to a specific asset the lender can claim, while an unsecured loan is not, and instead relies on the borrower's creditworthiness and often a personal guarantee. Secured borrowing puts the pledged asset at risk if the business cannot repay, whereas unsecured borrowing typically carries higher rates or smaller limits to reflect the lender's greater risk. Which option is available, and on what terms, depends on the lender, the asset offered, and the borrower's circumstances.
Why it matters to a business
For a business, a secured loan can make larger or longer term financing available, for example to buy premises or equipment, by giving the lender security. The trade off is that the pledged asset, and sometimes other assets where a wider charge applies, can be lost if the business defaults, and arranging the security can involve valuation and legal costs. A business should weigh the cost, the term, and what is being pledged, and confirm the current rates, fees, and conditions with the lender before borrowing.
Frequently asked questions
What is a secured loan?
What is the difference between a secured and an unsecured loan?
What can be used as collateral for a business secured loan?
What happens if a business cannot repay a secured loan?
Definitions, fees, features, and eligibility change and vary by region. This page was last reviewed on 14 February 2026. Confirm current terms with the provider before applying.