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Borrowing for Your Small Business

Secured Loans / Collateral

The type of loan you select can have a big impact on your bank's lending decisions. Secured loans mean that there are assets pledged (collateral) to secure the payment in the event you are not able to pay. Common types of collateral are equity in your home, accounts receivable, inventory of the business and equipment. Lenders go through an evaluation of the collateral to determine how much they can lend against it. The assets that are pledged are usually discounted by a certain percentage. The bank wants some protection should those assets fall in value during the term of the loan. Since you are offering collateral, the lender's risk is reduced significantly, and it's more likely that your loan will be approved.

You may also look to secure a loan guarantee from the Small Business Administration.

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