The larger the business loan you want to take out, the greater the likelihood the lender will request collateral. Perhaps you’re not sure what to offer the lender as collateral. If so, we hope the four suggestions below will help.
Business equipment such as computers or machinery is typically valuable. However, you need to consider the resale value and how soon the item will become outdated. These are two of the most important factors lenders consider when deciding whether to accept your collateral. They must be able to sell it for a decent price should you default on your loan.
This can be a good option if your business typically has a large stock of inventory that the lender could sell quickly for a profit. Like business equipment, you need to make sure the items won’t soon become obsolete or go out of style. The lender may hire someone to determine the liquidation value of your inventory and its estimated future depreciation before accepting it as collateral.
Unpaid invoices can be simpler for lenders to accept as collateral than equipment, inventory, or real estate. If you default on the loan, the lender just sends a bill to the customer that owes it to collect the debt. The lender could also include a clause redirecting payments away from your company only in the event of a defaulted loan.
If you’re willing to put your personal residence or rental property on the line, real estate can make an excellent form of collateral for a business loan. The value is often higher than other things you could pledge, and it should appreciate instead of depreciating over the years.
Are you ready to apply for funding for your business? Contact Impact Commercial Capital today to discuss the various options, with and without a collateral requirement.