Providing Collateral to Qualify for SBA Loans
In order to be considered eligible for an SBA loan, you would have to present collateral to back the same. The latter can be an asset such as equipment, inventory, or real estate, which can be sold and seized by the lender if you fail to make payments. In other words, it is one alternative way of recovering money which belongs to the lenders in case your venture fails. Remember that SBA loans need you to provide “adequate” collateral as security on all sub-kinds. Besides, a personal guarantee should be provided by the owner of 20% or more from the business which they plan to run.
Certain online lenders do not ask for collateral, but would definitely require a personal guarantee. A few others may ask for a personal guarantee on your business assets. This is another version of collateral which provides the lender with the right to seize business assets including inventory, equipment, and real estate, in order to recover an unpaid loan.
Almost every lender has a different requirement. Therefore if you have questions like ‘who qualifies for SBA loans?’ make sure you ask them clearly. In case you do not have the required collateral, or if you do not want to risk the loss of business and personal assets, then unsecured business loans are the better choice for you.