Collateral loans allow you to use the value of assets you or your business owns to guarantee repayment. These business loans are secured by the collateral, meaning that if you fail to repay you could lose that collateral. For this reason, your options for business loan collateral should be carefully considered. Here, we’ll outline those options.
You can generally use any of these as collateral for your business loan:
- Real Estate: Owning property has many advantages and using it for loan collateral may be one of the best. Putting up property can allow you larger loan amounts, but (especially if you use your personal home as collateral) you’ll want to be very certain you’ll have no problem making the payments. Â
- Equipment: If you’re in a business that uses heavy equipment, high-tech tools, or machinery, these items can act as collateral for your loan. The great thing is that you don’t lose the use of the collateral unless you default on the loan. So you can use the equipment to earn money in your business, while also using it to secure a loan to further grow your business. The lender will offer you a percentage of the current equipment value (rather than the original purchase price).Â
- Inventory: If you sell goods in your business, the inventory you have on hand can be used as loan collateral. Losing the inventory in case of default, however, could cripple your business. It’s always essential that you choose your collateral wisely.Â
- Invoices: This is like receiving an advance on your outstanding invoices, which represent funds owed to your company. You get paid early, and in a lump sum, but it’s not considered a loan, strictly speaking. This is known as invoice factoring. The factoring company buys the invoices from you at a discount, then gets paid the full invoice amount–directly from your customers. Â
When your business needs funds to cover operating costs, or for other business purposes, consider a loan secured by collateral. Learn more by contacting the experts at Kasher Capital today.
