Most business set ups often need the initial assistance of finance to get the business entity started. This is popularly acquired in the form of a loan which in most cases requires some sort of collateral to secure the intended loan amount more than adequately.
Most people turn to lending institutions such as banks, lending houses, finance houses and the likes for such assistance where some form of collateral is usually a designated requirement.
The process would require the lender to look over the company‟s history if any, business credit, revenues, balance sheets and equity contributions before an agreed sum can be settled upon.
When all this is in favorable condition then the next step would be for the borrower to provide collateral to secure the loan. The collateral is most commonly property, stocks, bonds and any other valuable assets the borrower may have that can equal or be more than the intended borrowed sum.
This would then be used to show the other possible source of loan repayment should there be a difficulty in servicing the repayments of the borrowed sum.
Keeping a detailed record of all the asset‟s worth is something that should be actively and accurately done every step of the way through the business setup.
Keeping such records will give those involved a better overview of the asset‟s worth and this can be done in a simple manner of an excel
spreadsheet. The following are some things that can be used as collateral to secure a loan:
• Real property – still the most popular asset to be put up as collateral.
• Business inventory and accounts receivable – this is a little trickier but banks are usually willing to lend if there is clear evidence of an authenticated sizable order in the works.
• Cash savings and fixed deposits – personal assets that are tangible are more like to be favored by the lender as their risks are minimalized.