Guide 6 min read

Secured Term Loans 101: Turning Equipment or Inventory Into Working Capital

If you own equipment, inventory, real estate, or receivables, you're sitting on more borrowing power than your credit score alone suggests. Here's how that actually works.

TL;DR

A secured term loan is backed by something you already own, instead of relying purely on credit and revenue history.
Common collateral: equipment, inventory, accounts receivable, and commercial real estate.
You typically get better rates and larger amounts than an unsecured term loan of the same size.
Approval leans on the collateral's value, which helps owners with credit challenges or thin financial history.
Downside: the collateral is at risk if the loan isn't repaid, so it's a real tradeoff, not a free upgrade.

1What a secured term loan actually is

It's still a term loan: a lump sum repaid on a fixed schedule. The difference is what backs it. Instead of underwriting purely on your credit score and cash flow, a secured term loan is backed by something specific you already own: equipment, inventory, receivables, or property. Because the lender has collateral to fall back on if things go wrong, they can typically offer better rates and larger amounts than an unsecured term loan would allow for the same file.

2What can actually serve as collateral

Equipment: machinery, vehicles, production line assets, anything with resale value
Inventory: particularly relevant for retail, jewelry, and product-based businesses; see how this works for jewelry stores
Accounts receivable: money owed to you by customers, advanced against before it's collected
Commercial real estate: owned property, used to secure larger facilities

📌 Different collateral types get valued differently. Equipment and real estate are appraised; receivables are typically advanced at a percentage of face value; inventory is valued conservatively against cost, not retail price.

3Why this helps owners with credit challenges

Because the lender's risk is offset by real collateral, a secured term loan shifts a meaningful part of the underwriting decision away from your personal credit score and onto the value of what you own. This is one of the strongest paths available for an owner with real assets but a less-than-perfect credit history. See what lenders actually look at with bad credit for more on this tradeoff.

4The real tradeoff to understand

⚠️ Heads up: The collateral securing the loan is genuinely at risk if the loan isn't repaid. This isn't a downside-free way to access better terms, it's a real tradeoff you're making in exchange for those terms.

It's also generally a slower process than an unsecured revenue-based product, since the collateral needs to be verified and sometimes appraised, typically 1–3 weeks rather than 24–72 hours.

5Who this is genuinely a good fit for

Owners who want to avoid giving up equity for a larger capital need
Businesses with valuable equipment, inventory, or property but inconsistent cash flow history
Larger facilities where an unsecured term loan either isn't available or is priced too high
Niche verticals like charter operators financing aircraft or vessels

Have equipment, inventory, or property to leverage?

Tell us what you own and what you need, and we'll tell you what a secured term loan would actually look like.

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