Even the best business idea cannot fully succeed without adequate capital; otherwise, how will the idea be implemented? For a business to succeed it needs to grow; and for growth to take place sufficient money must be put into the business. Sometimes getting sufficient money for your business might mean the necessity of collateral.
The challenge, therefore, becomes how you can raise enough capital for your small business. Well, taking a loan might be one way of obtaining capital; however, there are always risks connected to debts. But if the benefits of taking a loan outweigh the risks, then taking a loan would be ideal. Before any lender agrees to grant your request for a loan, they must evaluate your viability to pay the debt, and a form of collateral is also required to secure the loan. Here are five types of collateral most lenders may accept:
Some of the most commonly offered and accepted types of collateral are real estate property such as homes. Real estate assets are often used as collateral because they are usually readily available. If you decide to use property as collateral, take note that if you are unable to pay the loan it will have a drastic negative impact on your finances. Other properties that can be used as collateral include boats, equipment, cars and motorcycles.
2. Cash Secured Loan
Cash secured loans or a savings secured loan is whereby you apply for a loan in a financial institution where your account is based. So, in the event, you default on a payment the lender can liquidate your account. So, cash account serves as one of the types of collateral.
3. Inventory Financing
Another type of collateral is inventory financing, whereby a loan is granted on the basis of items listed on an inventory, which will be sold later.
4. Invoice Collateral
Invoice collateral, also known as accounts receivable financing is whereby invoices on outstanding payments are used as collateral. These types of collateral are great when you need cash flow for your business while it is locked up in unpaid invoices.
5. Blanket Liens
Blanket Liens are one of the most favored types of collateral by lenders. A lien is a legal claim that allows the lender to sell off the assets of a business if they default on an outstanding loan.
Don’t have collateral? There are financing options that don’t require it and have been a saving grace to business owners like you. Contact us today to find out your collateral-free financing options. We look forward to hearing from you. Email email@example.com or call 847-851-2223 at your convenience.