Business loans · Secured
Secured Business Loans: Collateral Types, Rates and How to Qualify
A secured business loan is backed by a specific asset the lender can claim if you default: equipment, receivables, inventory, real estate or cash. In exchange the lender offers more money, a longer term and a lower rate than it would unsecured, and will often approve a file it would otherwise decline. This guide covers each collateral type, what secured loans cost with Prime at 7.00%, how lenders value collateral, and when an unsecured loan is the better choice.
How Do Secured Business Loans Work?
A secured business loan pledges an asset as collateral, and the lender advances a percentage of that asset’s value: 80% to 100% of equipment cost, 70% to 90% of eligible receivables, 30% to 60% of inventory, 65% to 80% of commercial real estate, or 90% to 100% of a cash deposit. Because the collateral reduces the lender’s loss, secured loans in October 2026 price 2 to 6 points below unsecured loans for the same file (equipment at 9.9% to 24% versus unsecured term loans at 10% to 36% APR; bank secured loans at 7% to 10%), run longer (two to 25 years versus six months to five years) and go larger ($10,000 to $10 million). Credit still matters but less: equipment loans were approved in full for 71% of applicants in the Federal Reserve’s 2026 survey, the highest of any product, and asset-based lines approve files with credit in the 500s when the receivables are good. The trade is the asset itself, which the lender can repossess or collect, and a personal guarantee, which nearly every secured loan under $5 million still requires.
Secured Business Loans by Collateral Type
| Collateral | Product | Advance rate | Typical cost at Prime 7.00% | Term | Credit needed |
|---|---|---|---|---|---|
| Equipment or vehicles | Equipment loan or lease | 80% – 100% of cost | 9.9% – 24% (6% – 12% bank) | 2 – 7 years | 550 – 600+ |
| Accounts receivable | A/R line or invoice factoring | 70% – 90% of eligible invoices | 8% – 20% APR; 1% – 4% per 30 days factoring | Revolving | Customers’ credit matters most |
| Inventory | Inventory line or asset-based loan | 30% – 60% of cost | 10% – 20% APR | Revolving or 1 – 3 years | 600+ |
| Commercial real estate | Commercial mortgage, SBA 504, 7(a) | 65% – 80% of value (90% SBA) | 6.3% – 11% | 10 – 25 years | 680+ |
| Cash or CD | Cash-secured loan or line | 90% – 100% of deposit | Prime + 1 to 2 (8% – 9%) | 1 – 5 years | Any |
| Blanket lien on all assets | Bank term loan or SBA loan | Based on cash flow | 7% – 13.5% | 3 – 10 years | 680+ |
| Personal assets (home equity) | HELOC used for business | 80% – 85% of equity | Prime + 0 to 2 (7% – 9%) | 10 – 30 years | 680+ |
Product detail: equipment financing, A/R financing, inventory financing, HELOC for business.
Secured vs Unsecured: What the Collateral Saves
| $150,000 loan, 3 years | Secured rate | Unsecured rate | Monthly payment (secured / unsecured) | Interest saved |
|---|---|---|---|---|
| Bank, strong file | 8% | 10.5% | $4,700 / $4,876 | $6,300 |
| Online lender, good file | 12% | 20% | $4,982 / $5,575 | $21,300 |
| Online lender, weaker file | 18% | 32% | $5,423 / $6,510 | $39,100 |
Three-year interest on $150,000: secured vs unsecured
The weaker the file, the more the collateral saves; for a sub-650 borrower it can halve the interest.
Unsecured options are compared in unsecured business loans; current ranges in business loan interest rates.
How Lenders Value Collateral
- Equipment: invoice price for new equipment; orderly liquidation value (often 50% to 70% of cost) for used; titled vehicles by NADA or similar guides.
- Receivables: only invoices under 90 days old from creditworthy business customers; concentrations above 20% to 30% in one customer are discounted; consumer and government receivables are often excluded.
- Inventory: finished goods at 30% to 60% of cost; raw materials and work in process much less; perishables and fashion rarely count.
- Real estate: appraised value less senior liens; SBA 504 allows 90% financing because the SBA debenture sits behind the bank.
- Cash: at face value, which is why cash-secured loans price at the bottom of the range and approve any credit.
- The lien: lenders file a UCC-1 financing statement on the specific collateral or on all business assets (a blanket lien), which is public record and affects what the next lender can take.
How to Qualify for a Secured Business Loan
| Requirement | Equipment lender | Asset-based lender | Bank |
|---|---|---|---|
| Time in business | 6 – 12 months | 12 months | 2+ years |
| Personal credit | 550 – 600+ | 500+ with strong receivables | 680+ |
| Collateral documentation | Vendor quote or invoice | A/R aging, customer list, inventory report | Appraisal, schedule of assets, financials |
| Financials | Application only to ~$150K – $250K | 3 months of statements, aging | 2 years of returns, P&L, balance sheet |
| Guarantee | Personal guarantee | Personal guarantee | Personal guarantee, blanket lien |
| Speed | 2 – 7 days | 1 – 2 weeks | 3 – 8 weeks |
Share of applicants fully approved, by product (Federal Reserve, 2026)
81% of applicants were approved for at least part of the request. Source: Federal Reserve Banks, 2026 Report on Employer Firms.
- List what you own and what it is worth: equipment, receivables, inventory, property, cash.
- Match the asset to the product: equipment to an equipment loan, receivables to an A/R line, a building to SBA 504 or a commercial mortgage.
- Check existing liens. A blanket UCC from a prior lender may block a new secured loan until it is subordinated or released.
- Apply through RAN Funding to see secured and unsecured offers on one soft pull.
- Compare the all-in cost, including appraisal, filing and monitoring fees on asset-based lines.
When an Unsecured Loan Is the Better Choice
- The amount is small relative to revenue (under one month of deposits) and the term is short; the rate difference is worth less than the asset exposure.
- The asset is your livelihood. Pledging the one truck or the one machine the business runs on turns a cash flow problem into a going-concern problem if payments slip.
- You need the money this week. Unsecured online loans fund in one to three days; asset-based lines take one to two weeks, real estate loans a month or more.
- The collateral is already pledged. A blanket lien from a bank or SBA lender usually covers everything.
- You plan to sell or refinance the asset within the term; secured loans require payoff or lender consent first.
Common Questions
What can be used as collateral for a business loan?
Equipment and vehicles, accounts receivable, inventory, commercial real estate, cash or certificates of deposit, and, through a blanket lien, all business assets. Personal assets such as home equity can secure a loan used for business. Lenders advance a percentage of each asset’s value, from 30% of inventory to 100% of cash.
Do secured business loans have lower interest rates?
Yes, typically 2 to 6 points lower than unsecured loans for the same file: bank secured loans at 7% to 10% versus 8% to 11% unsecured, and online equipment loans at 9.9% to 24% versus unsecured term loans at 10% to 36% APR. The weaker the credit, the larger the saving.
Can I get a secured business loan with bad credit?
Yes. Equipment financing approves from about 550 with a down payment, asset-based lines approve files in the 500s when the receivables are from creditworthy customers, and cash-secured loans approve any credit. Equipment loans had the highest full-approval rate of any product in 2026 at 71%.
Does a secured business loan still require a personal guarantee?
Almost always, from owners of 20% or more, on loans under $5 million. The collateral reduces the lender’s loss; the guarantee covers any shortfall after the collateral is sold.
What happens if I default on a secured business loan?
The lender can repossess or foreclose on the collateral, sell it, apply the proceeds to the balance and pursue the guarantors for any shortfall. Most lenders will restructure before repossessing if you call early; the worst outcome comes from silence.
Is RAN Funding a lender?
No. RAN Funding is a business financing broker. We present your application to our lender network and show you the offers you qualify for; the funding partner sets the approval, amount, rate, fees and terms.
Sources
- 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey — Federal Reserve Banks
- H.15 Selected Interest Rates (bank prime loan rate 7.00%) — Board of Governors of the Federal Reserve System
- UCC filings and secured transactions (Article 9 overview) — Cornell Legal Information Institute
See What You Qualify For
One application, about five minutes, soft pull only. A funding specialist tells you up front which products fit your file, what they cost and how fast each one funds.
More on Secured and Unsecured Loans