What Collateral Do You Need for a High Risk Business Loan?

Finding and eligible for the right business loan for your company may prove to challenging, especially if you’re high risk. That’s why the more you know about the field, the better for you. This article is about business collateral and the right high risk business loan that you can get easily.

Avoid Collateral for a High Risk Business Loan

The U.S. Small Business Administration (SBA) reports there exist 28.8 million small businesses in the U.S. Let’s look at some interesting figures:

  • A U.S. Bank study shows that cash flow problems are the reason why 82% of businesses fail.
  • 29% are a failure because they’re ran out of cash.
  • Online lending (4%) was among the most popular small business funding option last year.

What about small business collateral? Well, lenders consider it as a guarantee that you can repay the loan in case you default. So, it lowers the risk for the lender. As for you, collateral can help you be eligible for lower rates and get quick access to working capital.

When it comes to the amount of collateral, it depends on a number of factors such as your credit rating, the reason you’re getting the funding, the type of lender, as well as what kind of collateral is required to provide.

Here’s what you should take into account when trying to get access to working capital:

  • Be honest about your situation and show why you need this capital.
  • Have a solid business plan in place that shows what your business does, who you’re running it for, and what makes you stand out from the bunch.
  • Take the time to go for the right lender for your business. Recently, alternative online lenders have gained immense popularity among borrowers, and that’s with good reason.

By the way, reputable alternative online lenders don’t need any collateral. With a true business funding provider, you can enjoy the cheapest rates for a high risk business loan and not only to start growing your company without difficulty.

  • Gather the Necessary Paperwork to have a complete application.

What Kind of Collateral You Need to Provide

As you see, certain types of loans, sometimes called “secured” or “collateral loans on property,” require borrowers to provide collateral. Let’s see what kind of collateral lenders are likely to require:

  • Real Property: Commercial and personal property since the value of real estate may remain the same or grow gradually.
  • Equipment: The equipment you’re purchasing to back your loan. Equipment as collateral on unrelated loans is also accepted.
  • Inventory: The inventory you’re purchasing to secure your loan.
  • Accounts receivables: Acceptable if your business’ cash flow is tied up in customer invoices.
  • Blanket Lien: The lender can repossess your business assets in case you default. 
  • Cash Deposit/Savings: Your business’s savings account.
  • Personal Assets: Your home, car, or investments.

Sometimes, you’ll need to collateralize your assets so to get a business loan you need for your company. Of course, lack of sufficient business collateral can’t keep you back from obtaining business financing if you work with the right alternative online lender in your field.

Author Bio: As the FAM account executive, Michael Hollis has funded millions by using high risk business loan solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.