It’s a fact: to succeed in business, sometimes you payday loans Utah need to borrow money to keep cash flow steady. But what do you do if you have bad credit? What business financing options do you have?
Not to worry. Even if your business and personal credit scores are too low to qualify you for traditional business financing, you still may qualify for a secured business loan with the right lender, also called a collateral business loan.
What is a Collateral Business Loan?
Collateral is an asset, which is anything of value that you can pledge against a loan. We’ll get into what can be used as collateral in the next section, but here’s what you need to understand about collateral and asset-based financing.
Having a high-value asset gives the bank something to take and sell should you not be able to pay off your loan. This reduces the bank’s risk, which makes it more inclined to approve you for a loan.
Here’s an example: let’s say you want to borrow $50,000 and you have equipment worth $85,000. You pledge the equipment as collateral and get the money. One day you realize you will never be able to repay the loan, and you default. The bank can then seize that equipment and sell it to cover what you owe. If the bank gets more than what you owe, they’ll keep that, too.
Generally, banks want collateral that is easy to liquidate, or convert to cash. Continue reading “Collateral Business Loans: What You Need to Know”