Credicorp

Secured loan

A secured loan is borrowing backed by a specific asset — property, equipment, a vehicle, or a charge over a company's assets — that the lender can recover against if the loan is not repaid. The asset acts as the lender's protection. Because the lender has something to fall back on, secured lending is often available at a lower rate and over a longer term than unsecured lending, but it ties up the asset for the life of the loan.

Security: A named asset, charged in the lender's favour.
Lender's recourse on default: To recover against the secured asset.
Typical use: Larger or longer-term borrowing where an asset can be pledged.
Trade-off: Lower cost, but the asset is at risk and is tied up.

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Secured versus unsecured

The defining contrast is what backs the loan. A secured loan is supported by an asset; an unsecured loan is not, so the lender relies on its assessment of the business instead. Unsecured lending is typically faster to arrange and shorter in term, while secured lending can be cheaper and longer but puts a specific asset on the line.

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Security and personal guarantees

Security over a company's assets is different from a personal guarantee. Security charges an asset; a personal guarantee makes an individual personally liable. A loan can have one, both or neither. A director should be clear which features a facility carries, because each has a different effect on what is at risk.

Secured loans and Credicorp

Credicorp's short-term business lending to UK limited companies and LLPs is unsecured — no asset is taken as security — and requires no personal guarantee, so the borrowing is an obligation of the company alone. Where a business needs longer-term, asset-backed funding, a secured facility from a specialist provider may be the better match. Credicorp is an independent UK lender, not affiliated with Credicorp Inc of Peru, Credit Corp of Australia, or any other Credicorp entity outside the United Kingdom (Company No. 16093826; ICO ZC157682).

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