Almost all banks will require some form of collateral from you when you’re applying for a loan. If you should default on that loan, it would then be able to seize your collateral in lieu of the money you owe them, so their investment is not a total loss. Here are the views on some of the major lenders in this country about having collateral when applying for a loan.
Some alternative lenders will require collateral for the financial products they offer, but in general, they are able to provide a number of products which don’t require collateral. Since they are not subject to the same stringent requirements that banks are, alternative lenders have the freedom of making decisions on loans which are based on observable situations, like a company’s cash flow and indebtedness. Additionally, the kinds of collateral which are often considered in alternative lending may be a company’s accounts receivable or its purchase orders, as opposed to expensive physical assets.
The Small Business Administration does ask that applicants supply collateral in the form of buildings, equipment, or inventory, but it does not insist that collateral be part of every application. In fact, the organization has stated that it will not reject any application solely on the basis of insufficient collateral. However, that means all other aspects of your application must be exemplary so that your application is not rejected on the basis of multiple disqualifiers.
As mentioned above, bank loans will almost always require some form of collateral along with a loan application. As a matter fact, most banks will require more collateral than the amount of the loan they’re providing you with. It’s fairly common for a bank to require $400,000 worth of collateral for a loan which they might be issuing in the amount of $250,000. If you’re applying for a bank loan, be prepared to supply a healthy amount of collateral.
Are you in need of commercial financing?
Whether you have collateral or not, if you’re looking for commercial financing, we’d like to hear from you. Contact us at Nations Capital Financing, so our specialists can consider some options for financing with you.