How to Get Small Business Loans With Collateral

When it comes to securing the funds for businesses, most owners rely on small business loans. In order to get a small business loan, you need to be able to secure the loan with collateral, or property. In the event you default on the loan, the bank may seize and sell your property to cover the remaining balance on the loan.

Difficulty: Moderate

Instructions

1. Put together your loan package. Most banks require financial statements, tax returns and plan for your business. Depending on your situation, they may also ask for your personal financial statements and tax returns.

2. Find banks that offer small business loans and ask for a list of requirements. The SBA approves certain banks as SBA lenders. Many banks require 10 to 20 percent as a down payment in addition to collateral.

3. Decide what assets to use for collateral. If you have equity or own your home, you can use it as collateral. Other types of collateral include accounts receivable, vehicles, inventory, furniture, fixtures and equipment.

4. Get an appraisal of the value. Banks may provide a list of acceptable appraisers or hire an independent appraiser to provide an estimate. The appraiser considers the resale value and the condition of the property.

5. Agree to the terms of the loan. When you sign the documents and receive the funds, you become liable for the entire amount of money you borrow. If you default and the bank sells your property, you may still owe money.

Tips & Warnings

• Some banks may require enough assets to cover 100 percent of the loan.
• If you don't own the property in full (own the title), the bank may not accept your personal property as collateral.