If you’re a small business owner in need of capital, you may be considering a collateral loan. A collateral loan is a loan that’s secured by some form of property or asset such as a luxury watch or jewelry or a classic sports car. But before you apply for a collateral loan, it’s important to understand how they work and what their benefits and risks are. This article will provide an overview of collateral loans for small businesses, including how they work and what to consider before taking one out.
What Is a Collateral Loan? A collateral loan is a type of loan that’s secured by an asset or piece of property. The asset serves as “collateral” for the loan, meaning that if the borrower defaults on the loan, the lender can keep the asset to recoup its loss. That said, collateral loans are generally easier to qualify for by borrowers with high-value tangible assets than other types of loans because they offer the lender some protection against default
How can collateral loans benefit my small business? There are several ways that collateral loans can benefit your small business:
Rapid access to capital – Since collateral loans can be easier to qualify for than other types of loans, they can help your small business get the funding it needs when traditional lenders are not an option. Instead of taking weeks to go through the application and underwriting process of a traditional loan, collateral loans usually fund within one or two business days.
Virtually no paperwork – Collateral lenders primary underwriting criteria is the value of the asset being used for collateral. There are no credit checks, personal guarantees, income statements, business plans or other types of documentation typical for traditional bank loans.
Flexible use of funds – Collateralized loans give you more flexibility in how you use the funds since there’s no restriction on what you can use them for (unlike some government-backed financing programs). You can use the funds however you see fit to grow or expand your business.
As you can see, there are many ways to get a collateral loan for your small business. However, not all lenders are created equal. Borro is the nation’s leading provider of loans that uses borrower’s luxury assets as collateral, having served over 15,000 borrowers. It is important to do your research and find one that best suits your needs. There are many factors to consider when taking out a collateral loan, such as interest rates, repayment terms, and fees. By carefully considering all of these factors, you can ensure that you get the best possible deal on a collateral loan for your small business.