What Can You Use as Security for a Business Loan?

The type of security you can offer shapes almost everything about a secured business loan: the amount you can borrow, the rate you will be offered, and which lenders will consider you. Understanding what qualifies as acceptable security is the starting point for any secured lending conversation. For an introduction to how secured business loans work in general, see our guide to what is a secured business loan.

Property

Property is the most widely accepted form of security for business lending and the one that opens the door to the largest loan amounts and longest terms. Both commercial and residential property can be offered, though lenders treat them differently.

Commercial property, such as offices, warehouses, retail units, or industrial space, offers strong security because it has an established market and can be sold relatively quickly in a default scenario. Most lenders will advance up to 70% to 75% LTV against mainstream commercial property. Where the purpose of the loan is to buy a commercial property outright, the natural product is a commercial mortgage rather than a standard secured loan. See our guide to what is a commercial mortgage for how that works.

Residential property, including owner-occupied homes and buy-to-let properties, is also widely accepted. Lenders typically advance up to 70% to 80% LTV for residential security. A director using their home as collateral for a business loan is common, particularly for smaller businesses that do not own commercial premises. The risk is personal. If the business cannot repay, the lender can force a sale of the property. Where short-term property-backed finance is needed, a bridging loan is sometimes the appropriate product. See what is a bridging loan for when that applies.

Business equipment and vehicles

Equipment, machinery, and commercial vehicles can be used as security, typically through asset finance rather than a standard secured business loan. The distinction matters. Asset finance is a product designed specifically for this type of collateral, where the asset being financed often serves as security for the borrowing.

If you are looking to borrow against equipment you already own, some lenders offer sale and leaseback arrangements, where you sell the equipment to a finance company and lease it back for continued use, releasing the capital tied up in it.

The challenge with equipment as security is that it depreciates and can be difficult to value consistently or sell quickly if enforcement is needed. Lenders typically advance less against equipment than against property, and terms are shorter. For a fuller explanation of how asset-backed equipment finance works, see our guide to asset finance explained.

Personal assets

Directors and business owners can offer personal assets as security for business borrowing. Residential property is the most common, giving lenders a clean asset with a transparent market value. Cash savings and investment portfolios are occasionally accepted but are less standard.

For sole traders, offering personal assets is effectively the default position. There is no legal separation between you and your business, so any secured lending against your personal assets is also personal liability. This is worth factoring in carefully before proceeding.

What makes a good asset for security?

Lenders are looking for assets that are clearly valued, marketable, stable, and free of complications.

A clearly valued asset has an accepted, independent valuation method. For property this is a RICS survey. For equipment it is more variable, which is partly why equipment commands lower advance rates.

A marketable asset is one that can realistically be sold in a reasonable timeframe if the lender needs to enforce. Commercial property in an established location is straightforward to sell. A specialist piece of manufacturing equipment may have only a handful of potential buyers in the UK.

Stability matters because the lender is exposed to the asset's value for the duration of the loan. Property in a strong market holds value and sometimes appreciates. Equipment depreciates from day one.

Complications reduce an asset's value as security. Unclear title, existing charges, planning restrictions, tenancy disputes, and legal issues all create problems for lenders who may need to sell quickly.

How the type of security affects your loan terms

Property security gives access to the widest range of lenders, the largest loan amounts, the longest terms, and the lowest rates. A well-secured commercial property at 65% LTV is at the lower-risk end of secured lending, and pricing reflects that.

Equipment security gives access to specialist asset finance lenders but at higher rates, shorter terms, and more conservative advance rates. The loan amount is capped by the lender's view of both the asset value and how quickly they could realise it.

Personal security works with most lenders but carries personal risk and is assessed on the same LTV and asset quality factors as commercial security.

For a full breakdown of how rates vary based on asset type and other factors, see secured business loan rates explained. For how the charge process works once you have identified your security, see how secured business loans work.