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How A Lack Of Collateral Can Impact Your Business

If you’re a small to medium-sized business owner in Canada and you have your sights set on growing your business, you’re going to need some business funding. But do you have any collateral to help you secure it?

Collateral has been discussed as one of the “Five C’s” of small business lending. According to, those Five C’s are Character, Credit, Capacity, Capital and Collateral. For the purpose of today’s blog, we’ll be focusing on how a lack of collateral can cause a lender to deny an application for a business loan.

What exactly constitutes as collateral?

Collateral is generally a form of property, such as your home, company vehicle, equipment or merchandise that you can put on the line in the event you default on a loan. It’s a bank’s security blanket, so to speak. To put it in rhyme: if you can’t pay, they can take your collateral away!

“Lenders may look to secure assets like real estate or equipment as collateral, though anything of value that is relatively liquid may also suffice,” explains, “Collateral reduces the risk to a lender by providing something of value in the event of a default. Although not all lenders look at collateral the same way, you should expect to be asked about whether or not you have collateral to secure a loan.”

Why is a lack of collateral such a problem for banks?

As Carol Tice explains on, banks don’t feel confident lending business owners money if they don’t have collateral. It serves a safety net and without it, most loan officers won’t make the leap. Tice notes that studies have found that the majority of small business owners who were short on collateral were denied business loans.

A 2011 Pepperdine University study found that nearly half of the 1,200 businesses surveyed sought a bank loan, but 60 percent had their application denied, she reports. Tice also reveals that “a first-quarter 2011 study from the finance site MultiFunding explains why the refusal rate is so high, and how banks think about your business and categorize small-business borrowers. Banks currently consider 15 percent of small businesses ‘non-lendable’ due to their lack of collateral, and another 47 percent are considered ‘marginal’ or ‘B’ borrowers, the report says.”

Can business funding be attained without collateral?

As far as Synergy Merchants is concerned, the answer is absolutely! Having no collateral doesn’t always have to be bad for your business. We proudly offer small and medium-sized business owners in Canada an excellent business funding alternative. Our unique merchant cash advance program offers you the opportunity to secure funding for your business without having to put any collateral on the line.

That is because a merchant cash advance is an advance on your future credit card and debit card sales. It is a not a loan. It is not borrowed money. It is a payment for your future sales which gives you the opportunity to do with it, as you please!

For more information about our unique merchant cash advance program, please don’t hesitate to call Synergy Merchants at 1-877-718-2026 or email us at You can also apply online for a free, no obligation quote!

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