Pledging collateral for a business loan can seem complicated, but it doesn’t have to be.
In this article, we’ll break down the definition of collateral, why it’s necessary, and how you can get a loan without needing to pledge collateral at all.
In this article, we’ll break down the definition of collateral, why it’s necessary, and how you can get a loan without needing to pledge collateral at all.
Key Takeaways
- Collateral is a set of assets pledged by a borrower to a lender, should the borrower default on their loan
- Collateral could be almost anything, from physical assets to retirement accounts to trading assets
- NEWITY facilitates non-collateral loans up to $50,000
What is Collateral?
When you apply for a loan, your lender needs to know that they’re protected. Even if your finances show that you are trustworthy, lenders often want extra protection against potential loss of value.
Collateral is that extra protection. If you as the borrower were to default on your loan, the lender would seize the collateral that was listed with the loan in order to get some or all of their money back.
Collateral is that extra protection. If you as the borrower were to default on your loan, the lender would seize the collateral that was listed with the loan in order to get some or all of their money back.
How is Collateral Identified?
Items used as collateral could be nearly any store of value, including:
- Equipment
- Inventory
- Furniture
- Real Estate
- Business Vehicles
- Cash or Savings
- Retirement Accounts
- Patents, Trademarks, or Other Intellectual Property
- Trading Assets
How Much Collateral is Needed For a Loan
For some loans to be considered “fully secured”, the borrower must be able to offer enough value through their business assets to cover the loan amount.
If a borrower’s business assets do not total or surpass the loan amount, lenders may file liens on personal assets. This also may be required for owners with 20% ownership or more in the business, or any personal guarantors on the loan.
While this sounds daunting, pledging collateral will not impact your business long as you pay back your loan in accordance with the loan term.
If a borrower’s business assets do not total or surpass the loan amount, lenders may file liens on personal assets. This also may be required for owners with 20% ownership or more in the business, or any personal guarantors on the loan.
While this sounds daunting, pledging collateral will not impact your business long as you pay back your loan in accordance with the loan term.
Can You Get an SBA 7(a) Loan Without Collateral?
If you’re in need of fast cash, pledging collateral means extra paperwork and, consequently, extra time.
Further, you may be wanting to avoid tying up your assets in case they are needed for other financing or operational flexibility.
So, if you’re looking for quick capital, do not have sufficient collateral to secure a loan, or just simply do not want to tie up your assets, we can get you the funds you need without overcomplicating things.
While most SBA 7(a) lenders and facilitators will require collateral on loans over $25,000, NEWITY facilitates SBA 7(a) loans up to $50,000 without any collateral requirements.
After all, pledging collateral isn’t always the most convenient way to get the funds you need.
If you’re a start-up, you may not yet have sufficient assets to pledge. Service-based industries or digital businesses may not have much to offer, either.
Further, you may be wanting to avoid tying up your assets in case they are needed for other financing or operational flexibility.
So, if you’re looking for quick capital, do not have sufficient collateral to secure a loan, or just simply do not want to tie up your assets, we can get you the funds you need without overcomplicating things.
While most SBA 7(a) lenders and facilitators will require collateral on loans over $25,000, NEWITY facilitates SBA 7(a) loans up to $50,000 without any collateral requirements.
After all, pledging collateral isn’t always the most convenient way to get the funds you need.
If you’re a start-up, you may not yet have sufficient assets to pledge. Service-based industries or digital businesses may not have much to offer, either.
How Do SBA 7(a) Loans Through NEWITY View Collateral?
If a borrower is applying for an SBA 7(a) loan over $50,000, there are different collateral requirements from the process discussed above.
When a borrower has been approved for their SBA 7(a) loan, NEWITY + Northeast Bank file a Uniform Commercial Code (UCC) lien on your business assets.
This UCC lien is a legal form that allows lenders to claim a security interest in a borrower’s business assets, should the borrower default on their loan. It is not tied solely to specific assets pledged by the borrower, but is rather a blanketed, general claim on all current and future business assets.
If the borrower makes all agreed upon payments, the UCC lien will not affect them or their business.
When a borrower has been approved for their SBA 7(a) loan, NEWITY + Northeast Bank file a Uniform Commercial Code (UCC) lien on your business assets.
This UCC lien is a legal form that allows lenders to claim a security interest in a borrower’s business assets, should the borrower default on their loan. It is not tied solely to specific assets pledged by the borrower, but is rather a blanketed, general claim on all current and future business assets.
If the borrower makes all agreed upon payments, the UCC lien will not affect them or their business.
Whether you’re looking for a simple & quick loan without collateral or evaluating your assets for a loan over $50,000, our team of experts at NEWITY is ready to help you secure the funds you need 3x faster than the national average.
