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7. Loan Security Explained (The Lender's Top 10 Tips)

Updated: Sep 18, 2023

Step into the realm of security – one of the things that is always top of mind for a lender.

Security stands as a pillar in the world of lending, where promises find tangible expression. In the conservative language of finance, it is the bedrock of certainty, the assurance that loans will be repaid, with assets serving as the guarantee. For borrowers, this entails the potential requirement of collateral, an additional safety measure situated beyond the confines of your business, ready to be liquidated in the event of repayment challenges.

Diving into the realm of 'secured loans,' we encounter a spectrum of assets that act as a shield of assurance to lenders. Among these assets are:

  1. Real Estate: Whether personal or business-owned.

  2. Equipment: These pieces of equipment play a vital role in your daily operations, strengthening your commitment to repayment.

  3. Vehicles: Whether personal or business-owned.

  4. Inventory: Laden with value, plays a vital role in your pursuit of prosperity, intricately integrated into your business's path to success.

  5. Cash: Liquid and readily accessible.

The Freedom to Flourish: Balancing Risk Numerous entrepreneurs exercise caution when considering the entwinement of their personal assets with their business endeavors. Others, particularly those embarking on new ventures, may not possess tangible assets suitable for collateralization. In certain cases, unsecured loans may be facilitated, contingent upon factors such as the requested capital amount and the risk profile of the business and/or lender.

In these instances, the borrower's character, a well-crafted business plan, a personal guarantee, and the lender's confidence can collectively pave the way for obtaining a non-collateralized loan.

Embrace the Path Ahead: Your Lender's Awaits As you construct your financing proposal, approach the matter of security with utmost clarity. The assets you put forth are not mere figures; they serve as a foundation of trust for the lender. Present what you can, and always bear in mind that security is more than just a contractual provision – it represents a commitment engrained in your path to achievement.

This is part of our series: What A Lender Looks For: The Top 10 see the main post here.


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