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Why Having No Collateral May Get Your Bank Loan Denied

“I’ll let you borrow my bike, but what are you going to let me borrow in return?” asked George.

“How about my baseball glove?” Roger replied.

“Your glove isn’t worth the same as my bike. No deal,” said George.

The above text could easily appear in a children’s storybook about borrowing and sharing. However, it also serves as a basic example of an interaction between a bank’s loan officer and a small business owner. With George representing the bank and Roger representing the businessman, the scenario often plays out the same way. Most small business owners have their loan applications denied when they can’t place something of value on the line.

Collateral is necessary for bank loan approvals.

As Amanda Lu explains on, secured loans have physical property to back them up. Usually, they come in the form of a house or a vehicle. This is what is called collateral. As she writes, loan officers prefer secured loans “because if you fail to pay the loan, there is property secured, usually through a lien, to the loan. That means that they would have a right to take or repossess the property.”

Essentially, banks look to protect themselves from borrowers who may end up being unable to pay back their loans. As a form of security, the bank would be able to claim the collateral so as to not lose out on all the money they’ve leant out. By attaining the asset, the bank then has a means to recoup the loan and their expenses.

The value of the collateral is taken into consideration.

A business owner with no collateral is not likely to earn the trust of a loan officer. As a result, he/she is often denied access to funding that is usually desperately needed. However, even when business owners do have something to put on the line, loan officers examine the value of the property in order to determine if the loan will be approved or not.

“For secured loans, the loan officer is going to look at the value of the collateral,” informs Lu, “They will want to make sure the collateral is for at least the amount of the loan. They may sometimes allow the loan to be more than the value of the collateral if the rest of the application is strong…The more value you have in your collateral compared to the amount you are requesting, the better it is for your application.”

On, Kari Luckett reminds business owners that their collateral may not be worth what it once was. Many forms of collateral depreciate in value over time and therefore, don’t offer the type of protection that banks are looking for. “Just because you have a large piece of machinery that was purchased at $100,000 doesn’t mean it will still be worth that much a few years down the road,” she writes.

No collateral is needed for a merchant cash advance!

At Synergy Merchants, we’re proud to state that our unique merchant cash advance program takes the issue of collateral off the table. No collateral is ever necessary in order to be approved for a merchant cash advance. Our application process is very quick and easy and most often, our clients are funded within 24 hours!

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

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