How Having Collateral Can Supercharge Your Business Growth

According to Merriam-Webster, “collateral” is defined as “property (such as securities) pledged by a borrower to protect the interests of the lender”. Do you own a home, a company vehicle, equipment or inventory? As a business owner, these examples of collateral can be very powerful assets for your brand. If you’re looking to expand and grow, a bank will definitely inquire about your collateral before considering the approval of your business loan application.

What are the top benefits of having collateral?

Lenders view collateral as a form of security as it reduces their risk if you default on the loan. Without collateral, your chances of getting approved for a loan drop significantly. Loan officers are a lot more likely to offer you higher loan amounts and lower interest rates when you have collateral to secure the loan.

Getting larger loan amounts helps you to undertake larger projects or make significant investments in your business. Securing a loan at a lower interest rate saves you money over the life of the loan. At the end of the day, putting your property on the line helps you to better secure the capital you need to invest in new equipment, hire additional staff or expand your operations.

How can collateral improve your company’s cash flow?

Instead of waiting for customers to pay their invoices or for sales to increase, you can use collateral to secure a loan or line of credit to cover your immediate expenses. Collateral also provides your business with a financial cushion during economic downturns. If your business experiences a slowing down of sales or revenue, you can use collateral to secure a loan to help you stay afloat until conditions improve.

It should also be noted that having collateral can increase your brand’s credibility with lenders and suppliers. It demonstrates that you are serious about your business and are willing to put your assets on the line to support its growth. This can make lenders more confident in your ability to repay a loan and suppliers more willing to extend credit terms.

What is the value of your collateral?

According to Michelle Black and Jordan Tarver of Forbes, your definition of value might not match up with a lender’s definition because the value of collateral is subjective.

“Imagine you have a piece of property that appraises for $100,000, and you want to pledge it as collateral to secure a business loan,” they writes, “The lender likely won’t give you credit for the full appraised value of the asset. Instead, the lender may consider that property to be worth just 80% to 90% of its appraised value, just in case the lender cannot resell the property for the full value for any reason.”

Is collateral necessary when applying for a merchant cash advance?

Absolutely not! With Synergy Merchants’ unique merchant cash advance program, you don’t need any collateral in order for you to be approved. Our program enables you to get your hands on the extra working capital your business needs within 24 hours! To learn more, please don’t hesitate to call us at 1-877-718-2026 or email us at info@synergymerchants.com. You can also apply online for a free, no obligation quote!