What collateral do lenders typically require for secured UK business loans?

Summary: For secured UK business loans lenders commonly ask for tangible, marketable security such as commercial property, business assets (plant & machinery), vehicles, stock or invoices, and often personal or director guarantees. The required collateral, its valuation and allowable loan‑to‑value (LTV) depend on loan size, sector, asset condition and lender type. If you’re seeking loans from £10,000 upwards, preparing clear title documents, recent valuations and an asset register will speed decisions. Complete a Free Eligibility Check to see which lenders accept the collateral you have — Get Quote Now. (Enquiry is not an application and does not affect your credit score.)

Please note: UK Business Loans is an introducer — we connect businesses with trusted lenders and brokers. We do not lend. Completing our enquiry is free and for matching purposes only.

What does “secured” mean — and why lenders ask for collateral?

“Secured” finance means the lender takes a legal charge over an asset or assets so they have a route to recover funds if the borrower defaults. Security reduces lender risk, enabling larger loan amounts, longer terms or lower interest rates compared with unsecured borrowing.

Lenders will usually require security when: the loan is sizable (commonly £10,000+), the business credit profile is limited, the loan is property- or development-related, or where the lender’s underwriting model demands tangible repayment options. For borrowers, sensible use of security can unlock cheaper capital — but it increases risk to the business and sometimes to personal assets.

Free Eligibility Check — tell us what collateral you have and we’ll match you to lenders and brokers who accept it.

Typical collateral for UK commercial finance

Commercial property (freehold / leasehold)

Commercial property is the most common and preferred form of security for larger loans. Lenders take a first or second legal charge over freehold or long leasehold titles. They usually instruct a RICS surveyor to value the property and set a loan‑to‑value (LTV) limit — commonly 60–75% of market value for mainstream lenders, though specialist funds can be higher or lower depending on risk.

Special considerations: properties with tenants, development sites or those with planning conditions attract tighter LTVs, staged releases and additional covenants or retentions.

Residential property as additional security

Directors’ residential property is sometimes accepted as additional security (a second charge) to support commercial borrowing. That increases personal risk and can complicate refinancing; lenders typically require a formal legal charge and will disclose priority and enforcement terms clearly.

Business assets & equipment (asset finance)

Assets such as plant, machinery, shop fit‑outs and specialised equipment are commonly used for asset finance or hire‑purchase. Lenders value assets based on condition, age, and resale market. Asset finance providers may take a fixed charge over specific items or a floating charge over the business’s moveable assets.

Stock and inventory

Retailers and manufacturers can use stock as security. Because stock is consumable and fluctuates in value, lenders often use lower LTVs and impose monitoring via control accounts, periodic stock checks or inventory management covenants.

Debtors / invoices (invoice finance)

Invoice discounting and factoring use unpaid invoices as the primary security. Providers may take control of debtor collections (factoring) or allow the business to collect (invoice discounting). Facilities vary between recourse (business bears bad debt risk) and non‑recourse models (provider assumes certain risks).

Vehicles and fleets

Commercial vehicles are frequently funded through hire‑purchase or leasing. Lenders retain title or use a log‑book style charge until the finance is repaid. Fleet values, mileage and condition affect terms and LTV.

Cash, deposits & bank guarantees

Cash collateral (blocked accounts, cash deposits or bank guarantees) is the cleanest form of security but ties up liquidity. It’s commonly used for short‑term facilities or where borrowers lack tangible assets.

Personal and director guarantees

Many lenders ask for personal guarantees. A guarantee can be unsecured (a promise to pay) or secured (backed by a charge over personal property). Secured guarantees create direct risk to personal assets and can affect creditworthiness and estate planning. Directors should understand scope — whether the guarantee is limited, joint & several, or unlimited — and seek independent legal advice before signing.

How lenders value and assess collateral

Valuation and assess­ment combine independent professional appraisal, legal searches and commercial judgement. For property, most lenders require a RICS valuation or a lender’s survey. For assets, lenders look at asset registers, depreciation schedules, service histories and resale routes.

• LTV bands: differ by asset — commercial property often 60–75% LTV, equipment and vehicles typically 40–70% depending on age, stock and invoices lower LTV due to volatility.
• Marketability: lenders prefer assets with established secondary markets (e.g. standard vehicles, mainstream plant).
• Condition & age: older or bespoke assets reduce LTV and may require insurance or guaranteed buy‑back arrangements.
• Environmental & legal checks: contaminated land, restrictive covenants or leasehold defects can materially reduce value or block acceptance as security.

Typical documents lenders request:

• Title deeds and up‑to‑date Land Registry entries (property)
• Recent valuations or RICS survey reports
• Asset register with serial numbers and purchase invoices
• Insurance certificates and maintenance records
• Management accounts, VAT returns and cashflow projections
• Proof of ownership for vehicles (V5), and for debts, aged debtor listings

See if your collateral qualifies — Get Quote Now.

Sector-specific collateral rules

Different sectors have tailored security expectations:

• Construction & development: lenders commonly use staged funding tied to practical completion milestones, take cross‑charges on multiple plots, require contractor retention arrangements and may demand developer guarantees or bonds.
• Hospitality & retail: fixtures, fittings and stock are used, but leasehold restrictions and landlord consents are often required before charges can be registered.
• Sustainability projects (solar, EV chargers): asset-backed finance will consider expected contract revenue (e.g. feed-in or PPA), equipment warranties and energy performance credentials; governmental grants or subsidies may need disclosure.

For specialist sectors, working with a broker experienced in your industry can improve outcomes — they’ll match you to lenders who understand your collateral and cashflow profile. Learn more about tailored options on our commercial finance page: commercial finance.

If you don’t have property or major assets — alternatives

Not everyone can or wants to offer traditional security. Alternatives include:

• Unsecured business loans (usually higher rates and lower sums)
• Invoice finance or merchant cash advance (based on sales or unpaid invoices)
• Peer‑to‑peer and marketplace lenders (often more flexible on security)
• Revenue‑based finance or revolving facilities
• Third‑party guarantors

Specialist lenders assess affordability and business performance rather than tangible assets. A broker can identify providers willing to accept non‑standard security or alternative underwriting approaches.

Prepare your collateral — practical checklist to speed funding

Organised documentation reduces delays. Before you enquire or apply, gather:

• Up‑to‑date management accounts (last 12–24 months)
• Asset register with purchase dates, serial numbers and valuations
• Property title deeds, current leases and Land Registry documents
• Recent RICS valuation or estate agent evidence for property
• Insurance certificates demonstrating full cover
• Copies of major contracts, supplier/customer agreements and licences
• Proof of director ID and address
• Simple business plan and 12–24 month cashflow forecast

Expect typical third‑party costs: valuations, legal fees for charge registration, and possibly surveyor or environmental reports. Timelines vary — small asset finance deals can complete in days; property‑backed or development loans often take several weeks to months.

Start your Free Eligibility Check — it takes a couple of minutes and helps us match you to lenders who accept your collateral.

Risks of secured borrowing — what business owners must consider

Secured borrowing transfers risk. Key points to understand:

• Repossession risk: if you default, secured assets can be seized and sold to repay the debt.
• Personal guarantees: may expose directors’ personal assets. Secured guarantees permit lenders to enforce against personal property.
• Priority of charges: first charges rank ahead of second charges and unsecured creditors. Check existing security and intercreditor arrangements.
• Cross-default & cross‑charge clauses: may cause wider consequences if one facility breaches covenants.
• Early repayment penalties: read terms carefully — some commercial facilities carry break costs or exit fees.

Always obtain independent legal and professional advice before agreeing to security or signing guarantees.

How UK Business Loans helps

We’re an introducer that speeds the search for funding. Our process is simple:

1. Complete a short enquiry — we ask about the loan amount, purpose, turnover, trading history and the collateral you can offer.
2. We match you to lenders and brokers in our panel who are most likely to accept your collateral and can deliver the solution you need.
3. Selected partners contact you to discuss terms and next steps so you can compare offers and choose the best fit.

Our service is free to use, confidential and non‑binding. We typically work with businesses seeking loans from £10,000 upwards.

Ready to find the best match? Get Quote Now — Free Eligibility Check. Enquiry is not an application and won’t affect your credit score.

Frequently asked questions

1. What collateral do lenders typically require for secured UK business loans?
Lenders commonly ask for marketable tangible security such as commercial property, business assets (plant & machinery), vehicles, stock or invoices, and often personal or director guarantees, with acceptable collateral and LTVs varying by lender and loan size.

2. Can I get a business loan without property or major assets?
Yes — alternatives include unsecured business loans, invoice finance, merchant cash advances, peer‑to‑peer lending and revenue‑based finance, though these often carry higher rates or different underwriting criteria.

3. How much can I borrow against commercial property (typical LTV)?
Mainstream lenders usually offer around 60–75% LTV on commercial property while specialist funds may vary above or below that range depending on risk and property condition.

4. Will providing a personal or director guarantee put my home at risk?
If a guarantee is secured (e.g., a second charge on residential property) your personal assets can be at risk, so always seek independent legal advice before signing.

5. How do lenders value equipment, stock and invoices for asset finance or invoice finance?
Lenders assess condition, age, marketability and resale routes for equipment, apply lower LTVs to fluctuating stock, and base invoice facilities on aged debtor quality and recoverability.

6. What valuation, legal and other third‑party costs should I expect when taking secured finance?
Borrowers typically pay for RICS valuations, surveyor or environmental reports and legal fees to register charges, though some deals may include negotiated contributions or caps.

7. How long does it usually take to arrange secured commercial finance?
Timescales vary from days for small asset finance to several weeks or months for property‑backed or development loans due to surveys, legal searches and progress draws.

8. Will submitting an enquiry with UK Business Loans affect my credit score?
No — completing our free Eligibility Check is a soft, non‑binding step that does not affect your credit score; lenders may run credit checks later if you proceed.

9. Can start‑ups or businesses with poor credit find lenders through UK Business Loans?
Yes — we match you to FCA‑regulated brokers and specialist lenders who work with start‑ups and businesses with imperfect credit using alternative underwriting or guarantor options.

10. How does UK Business Loans match my business to the right lenders or brokers?
We use the details from your short enquiry (loan amount, purpose, turnover, trading history and collateral) to connect you with trusted, sector‑specialist lenders and brokers most likely to accept your profile.