Is a Secured Loan a Good Idea?

Secured loans can be excellent—when the asset and cash flow justify them. By pledging collateral (equipment, vehicles, AR/inventory), you usually get lower rates, larger limits, and longer terms than unsecured options. The trade-off is reduced flexibility (liens, covenants, PGs) and a bit more process. Here’s a practical way to decide.

When a secured loan is a good idea

• You’re buying a long-life asset (truck, excavator, CNC) and want the lowest all-in cost. See Equipment Loans.
  
  
• You need a bigger limit than unsecured lenders will offer. Start with Secured Loan.
  
  
• You want predictable payments aligned to useful life (48–84 months). Model scenarios in the Calculator.
  
  
• You’re consolidating expensive short-term debt into a longer Term Loan via Business Refinancing.
  
  
• You’re a startup with strong collateral; programs like the CSBFP can help.
  
  

When it may not be the best fit

• You need funds urgently for payroll, marketing, freight, or inventory and don’t want liens. Consider Working Capital Loan or Unsecured Loan.
  
  
• Your need is revolving/seasonal. A Line of Credit or Asset-Based Lending (AR/inventory) is usually smarter.
  
  
• The asset depreciates very fast and you expect to upgrade soon—run a Lease with a buyout to keep payments lower.
  
  

One-minute decision framework

• Own & keep 5–10 years? Secured loan.
  
  
• Cash-flow first, upgrade later? Lease with small buyout.
  
  
• Frequent draws/repayments? Line of Credit or ABL.
  
  
• Already own equipment but need cash? Refinancing & Sale-Leaseback.
  
  

Quick comparison (use case → best fit)

Benefits vs. trade-offs

Benefits: lower rate, higher limit, longer term, approvals for asset-heavy firms.
Trade-offs: PPSA liens (sometimes blanket), personal guarantees, reporting/insurance requirements, and slower closing than a light unsecured facility. If those constraints matter, price the opportunity cost in your decision—don’t look at rate in isolation.

Case snapshot (Ontario)

A paving contractor needed a used paver + compactors before bids closed. A lease with 10% buyout dropped the monthly ~15% vs. a pure loan, preserved cash for materials, and left room for an AR-backed ABL later. They delivered the project, then refinanced to a lighter-covenant term loan after 12 months of clean payments.

FAQs

Is a secured loan always cheaper than unsecured?
Usually, yes—collateral reduces lender risk, which often lowers pricing. Compare both in the Calculator.

Will I need a personal guarantee?
Often for SMEs. You can sometimes negotiate a cap/step-down after strong payment history. See Secured Loan.

Can startups qualify?
Yes, if the asset has strong resale value or with programs like CSBFP.

How fast can I fund?
24–48h approvals are common with clean docs; filings/insurance can add days. If timing is tight, bridge with a Working Capital Loan.

What if I already own equipment?
Monetize it via Refinancing & Sale-Leaseback and keep the gear on the job.

What if I need revolving flexibility?
Consider a Line of Credit or Asset-Based Lending tied to AR/inventory.

‍

If you want a lender-style read on your numbers, feel free to contact our credit analysts. We’ll model secured vs. unsecured, loan vs. lease, and price the options against your cash flow.

• Run numbers: Calculator
  
  
• Explore: Secured Loan, Equipment Loans, Equipment Leases, Business Loans
  
  
• Get a same-day review: Contact Us
  
  

Mehmi also sells equipment directly—see Inventory for in-house units we can finance end-to-end.