Creative Collateral Possibilities - Obtaining Secured Business Credit

A secured business credit is generally the only option for a would-be business owner to get the necessary financing to open the company doors. There are ways to get it done if you have collateral to offer as security.

Real Estate

Real estate is actually the preferred collateral when obtaining secured business credit. This gives the lender the confidence that there will be no default on the loan, and in the event there is, then they will secure the property that is used as collateral in order to recover their investment.

Real estate, under normal circumstances is understood to maintain its present value or to even grow in value periodically. Therefore, lenders view real estate as the best collateral for secured business credit, with the expectation that if they must sell the property, they will at least get full value in return.

Equipment as Collateral

Lenders will sometimes accept equipment as collateral, or at least as particle collateral when they extend credit to you. The problem with using the equipment as the collateral in the view of the lender is that the equipment in question generally declines in value rather rapidly. They may also consider equipment as collateral along with some other means as well such as inventory.

Inventory

A lender will sometimes accept inventory as collateral when they extend credit to you. However, be prepared to offer the inventory as collateral at only partial value. The lender will look at the collateral, and will analyze the amount of time it will take to offload the inventory should you default on the secured business credit extended to you.

They will not look at it in terms of get full price for the merchandise but in more of a way as to how much they can get for each product when it is liquidated at an auction.

It sounds harsh, but you have to understand that they are in general putting significant sums of money at risk on an almost daily basis. They have to have some means at their disposal of recovering this money, or they won’t be in business very long.

The average lender would ideally like to lend money to everyone. The reality is that they have to look at certain criteria before they do extend secured business credit to be reasonably certain that they are making a good investment themselves.

Cosigner for Secured Business Credit

Despite the fact that the lender may accept the collateral offering for the secured business credit, they still may also require that you have a cosigner with good credit.

The lender will want to exercise every option that is available to them in order to be certain that they will recover their investment. During times of financial hardship, they still want and have to conduct business. Its how they make their money, however they will be a little more proactive about making sure the money returns to them.

Even during times of prosperity, they will still have many of these requirements, but perhaps are looking at things in a more relaxed manner.