Property-Backed Secured Financing

What is property-backed secured financing?

Also referred to as property-backed loans or asset-based financing, property-backed financing allows businesses to use their real estate as collateral to secure a loan. This solution can offer businesses several advantages, including:

• Access to Capital: Businesses can access significant funds compared to unsecured loans, potentially aiding in growth, expansion, or meeting operational needs.

• Favourable Interest Rates: Due to the presence of collateral, lenders often offer lower interest rates compared to unsecured loan options.

• Flexible Repayment Terms: Depending on the lender and specific situation, repayment terms can be structured to align with the business's cash flow.

However, with property-backed finance, it’s important to note that if the borrower defaults on the loan, the lender has the legal right to seize and sell the property to recover any outstanding amount. Lenders will also have a fixed loan-to-value ratio that limits the loan amount to a percentage of the property’s appraised value.

Property-backed secured financing is evidently an important solution for businesses seeking access to capital, but it's crucial to weigh the risks and carefully consider eligibility requirements before taking on such a loan.