Giving security

Welcome to Francis Wilks & Jones, one of the country’s leading firm of legal experts when it comes to giving security. If you are considering giving security as part of a business transaction, then independent legal advice is highly recommended. Without that advice, you can unwittingly end up in difficulties. Whatever your enquiry, please do contact us on 020 7841 0390 and we will endeavour to assist you.

1. Giving Security

If you are borrowing money for your business, the lender is likely to ask you to provide security in order for you to access your business loan.

Depending on whether you are borrowing as a sole trader or via a company will determine the type of security that is available and what the lender may require to support your business loan.

If you are taking out a secured business loan you will want to know that the security you are asked to provide only extends to the assets over which you intend to give security.  It will be important to review the security documents to ensure that the assets are clearly set out.  If you are a company director and are considering providing a personal guarantee, indemnity or security over your personal asses for your company, you will need to be aware of what effect this could have on your personal finances in the event of your company’s failure to repay its obligations.
Read more

2. Secured Business Loan

We are often asked, “What is a secured business loan?”  It is a loan agreement between a lending institution and a business under which the borrower is provided with business funding and gives security to the lender.  The security may take a variety of forms, for example a charge over property, a pledge agreement or lien.

You may ask why security needs to be taken for your business loan?  It could be a requirement of the lender as it provides the recourse in the event that the borrower defaults on repayment.  As a borrower you are likely to have a broader range of business loans available if you are able to give security as unsecured business loans are perceived as higher risk by many lenders.
Read more
Back to the top of the page

3. Business Funding

As a borrower you may be interested to know about the different types of business funding available to you.  You can start by researching the market and considering the types of lending institutions which would be willing to provide you with a business loan and on what terms.  Often lenders will want to ask you to give security which allows them to take possession over the charged assets in the event of non-payment.
Read more
Back to the top of the page

4. What deposit do I need for a business loan?

We are often asked, “What deposit do I need for a business loan?”  The answer to this question tends hinge on how much you propose to borrow and on what basis.  Lending institutions may not request a deposit for a business loan as they will have the collateral of secured assets to fall back on in the event of non-payment.  For an unsecured loan you are more likely to need to put down a deposit which will vary in size depending on how much you intend to borrow and your financial situation. 
Read more
Back to the top of the page

5. What is required for a business loan?

You may ask yourself: what is required for a business loan?  The answer to this question is determined by how much you intend to borrow and on what basis.  The process of applying for a secured loan is very different from the application process for an unsecured loan as you will need to prove that you own good title to the assets you are securing the loan against or otherwise or in addition provide a guarantee or indemnity.  For an unsecured loan, the lender is likely to request that you provide a deposit which will vary in size depending on the finances of your company or if you are a sole trader your personal credit history and how much your business intends to borrow. 
Read more
Back to the top of the page

6. What is collateral in business?

We are often asked, “What is collateral in business?”  Collateral is another word for security and can encompass a wide range of assets stock, plant and machinery, real estate, intellectual property, debts, vehicles and goodwill, among other things.  A business loan which is backed by collateral will involves the lender taking security over assets owned by the borrower to ensure that it can take possession of and sell those assets if the borrower fails to repay the loan. In addition a guarantee or indemnity may need to be provided by another party to ensure that the lender will be repaid in the event of the borrower defaulting.
Read more
Back to the top of the page

7. What is a Secured Loan?

A secured loan involves the lender taking security over assets owned by the borrower to ensure that it can take possession of those assets if the borrower fails to repay the loan. Another form of security is where a guarantee or indemnity is provided by another party to ensure that the lender will be repaid in the event of the borrower defaulting.  The assets over which security is taken is  often referred to as ‘collateral’.
Read more
Back to the top of the page

8. What can be used as Collateral for a Business Loan?

Assets owned by you or your business can be used as collateral to secure your business loan, including, property - this could be commercial property or your own home, plant and machinery, inventory, intellectual property, e.g. registered trademarks or designs, patents and shares, vehicles, debts and other assets.
Read more
Back to the top of the page

9. What type of loan requires collateral?

You may have a question concerning what type of loan requires collateral.  Business loans which require collateral are also known as secured loans and involve the lender taking security over assets owned by the borrower.  The purpose of the borrower giving security is so that the lender can take possession of those assets if the borrower defaults on repayments and sell them to obtain repayment.  Another structure involves the borrower requesting a guarantee or indemnity from another party which takes on the liabilities for the debt in the event that the borrower defaults.

Not all business loans require collateral, for example unsecured loans.  These may be more difficult for borrowers to obtain as the lender will consider these as a higher risk form of lending.
Read more
Back to the top of the page

10. Is collateral required for a small business loan?

As a small business owner you may ask, “Is collateral required for a small business loan?” The answer to this questions will be depend on a number of factors, including the amount of money being borrowed, the financial history of the borrower and the type of lending institute which is providing the loan.

A loan which is backed by collateral involves the lender taking security over assets owned by the borrower to ensure that it can take possession of those assets, and sell them in order to be repaid, if the borrower defaults on the loan.  Additionally, a guarantee or indemnity may be provided by another party to ensure that the lender will be repaid in the event of the borrower defaulting. 

Collateral is not always required for a small business loan, but the borrower may be able to obtain business finance at a lower interest rate with collateral as the funder will hold this as security in the event that the borrower defaults on loan repayments. 
Read more
Back to the top of the page

11. To Get a Business Loan What do I Need?

You may ask yourself: to get a business loan what do I need?  The simple answer is that it depends how much you intend to borrow and on what basis.  Applying for a secured loan is a different process from applying for an unsecured loan as you will need to prove that you own good title to the assets you are securing the loan against or alternatively provide a guarantee or indemnity.   For an unsecured loan you are likely to need to put down a deposit which will vary in size depending on how much you intend to borrow and the cost of borrowing will usually be much higher as the lender considers this a higher risk loan. 
Read more
Back to the top of the page

12. How do I secure a business loan?

As a business owner you may wonder, “How do I secure a business loan?” This question is determined by the state of your business finances as well as each businesses circumstances, such as how much you need to borrow, what the business loan is intended for and whether it is on a long term or short term basis. 
Read more
Back to the top of the page

13. Do all business loans need security?

You may be a business owner and have a question: “Do all business loans need security?”  The answer to this question is that security is not needed in all business loans as they can be provided on an unsecured basis.  Security can, however, provide the borrower with the choice of a broader range of business loans as some funders will not consider granting unsecured business loans due to the risks of default and lower borrowing costs.
Read more
Back to the top of the page

14. Can I get Business Loan with no Money?

It is possible to get a business loan with few or no capital reserves but having poor cash flow will certainly decrease the likelihood of you being offered a wide range of loan products. 
Read more
Back to the top of the page

15. What is Unsecured Business Loan?

An unsecured business loan involves the lender providing a loan to a borrower without taking any security or guarantee or indemnity from a third party.  These are typically considered as risky because if the borrower cannot repay the lender will be an unsecured creditor on a winding up.
Read more
Back to the top of the page

16. What are the Risks of Taking out a Business Loan?

There are many risks of taking out a business loan, one of the most common is not being able to keep up with loan repayments.  This can be caused by a number of unforeseen external factors, such as the client base shrinking and any injection of cash from a loan cannot reverse the change in the market.  If the business loses work after taking out the loan it may struggle to make repayments resulting in an event of default.
Read more
Back to the top of the page

17. What does Defaulting on a Loan Mean?

You may ask: what does defaulting on a loan mean?  This essentially comes down to whether the borrower has failed to make loan repayments or in some other way has breached the terms of the agreement on which money was lent. This may mean the lender will have the right to terminate the agreement and make the loan payable on demand.  This means that the borrower may immediately receive a request to pay back the full amount of the loan, interest and charges to the lender.
Read more
Back to the top of the page

18. What happens if you default on a business loan?

As a business owner you may ask: what happens if you default on a business loan?  In order to understand this question we must understand the meaning of a default.  A default occurs when the borrower does not keep up with loan repayment or otherwise breaches the terms on which the loan was made.  The default will typically give the lender the right to be able to call in the loan and request immediate repayment.
Read more
Back to the top of the page

19. Can I use my home as collateral for a business loan?

As a business owner you may ask, “Can I use my home as collateral for a business loan?”  The answer to this question is yes, although you may wish to weigh up the advantages and disadvantages of this strategy.
Read more
Back to the top of the page