SBA Loan Collateral
The Small Business Administration (SBA) defines loan collateral as "an additional form of security which can be used to assure a lender that you have a second source of loan repayment." Pre-exisiting business assets such as your building and equipment are just a few of the sources that will be accepted as repayment if you default on your loan.
Understanding SBA Loan Collateral
If you don't have a building or equipment to deem as collateral, you can also offer inventory, cash savings, or deposits to your lender. You can also offer a personal guarantee, which is an agreement to your lender to make yourself personally liable for the debt. This means that if your business fails to pay back the loan, creditors will seek you out and hold you personally responsible for repayment.
Getting a Small Business Loan Without Collateral
If your small business does not have collateral to guarantee, you still have options.
- SBA 7(a) Loan. An SBA 7(a) loan requires the borrower to show positive cash flow. If you are accepted for an SBA 7(a) loan, the Small Business Association will guarantee 75% of loss on the loan to the lender.
- Alternative lender. Alternative lenders provide financing options to business owners outside of a traditional bank loan. Alternative lenders are typically used when a business owner is unable to obtain a bank loan.
- Peer-to-peer lending. With peer-to-peer (P2P) lending, individuals can borrow and lend money without the use of an official financial institution.
Choosing the Right Loan
When securing a small business loan, you want to be sure that you are choosing a loan that makes sense for your business. Claris Finance can help.
Claris Finance helps business owners find financing that best suits their company's needs. Contact us today to discuss your options!