Using Collateral for a Business Loan

Owning your own business can be very rewarding.

One of the challenges most entrepreneurs face is funding. To grow your business, it’s essential to secure a business loan to buy equipment, real estate, or expand current operations. One of the best ways to secure that funding is with collateral.

Business Loans Start with Collateral (and Cash)

Collateral refers to a piece of property or valuable equipment that you pledge to a lender to secure a loan to buy more equipment or property. You can lower the amount being financed by offering a cash down payment. 

Having collateral reduces the risk to the lender and can help you secure more funding based on the value of the collateral. Always remember, the lender will not give you 100% of the collateral value. That’s because if you default on the loan, it will take considerable resources to auction or sell your collateral. Items that make the best collateral are real estate (business or personal), equipment, as well as cars or trucks. 

Getting Credit

The amount of credit or financing you can secure usually depends on the value of the collateral. At InRoads, the collateral value and the amount we’ll lend depends on the type of collateral. For example, we may advance up to 75% of the value of real estate or up to 80% of the value of equipment.

Adding Up Your Collateral

Do you know how much collateral you have right now? Don’t worry, you’re not alone. But it’s a good idea to start a spreadsheet with your current business assets and a conservative value for each one. As you acquire more machines and property, add it to the spreadsheet. When you go to get a loan, you can simply give those numbers to the lender to start the conversation.

InRoads is Your Business Partner

Our business services team knows what it takes to help you plan ahead, build profits, and achieve success. From business checking and savings options to auto and equipment loans and merchant card services, our team is ready to help.