A reader recently posed a great question: what counts as collateral for a business loan?
Anything you or your business own can be used as collateral for a business loan. If their is another lien on the asset already, a lender might not be able to use it (unless it has a lot of value).
Lenders prefer real estate as collateral for a business loan. That’s because real estate is easy to appraise accurately and quickly. It also holds it’s value and has a strong resale market. But lenders will also consider things like vehicles, equipment, stocks & bonds, accounts receivable, and inventory as collateral for a small business loan.
Most lenders will discount collateral to reflect continued wear & tear, cost to collect, etc. That means collateral will be assigned a value lower than current fair market value by lenders. For example, real estate might be worth 90% fmv, equipment 50-75% fmv, and furniture & fixtures maybe 10-25% fmv.
315 Madison Avenue, 24th Floor
New York, NY 10017
Disclaimer: We spend hours researching and writing our articles and strive to provide accurate, up-to-date content. However, our research is meant to aid your own, and we are not acting as licensed professionals. We recommend that you consult with your own lawyer, accountant, or other licensed professional for relevant business decisions. Click here to see our full disclaimer.
Product or company names, logos, and trademarks referred to on this site belong to their respective owners.