What if you Do Not Have Enough Collateral for an SBA Loan?
Due to this, they like to be protective in the event of a borrower seeming unable to pay back their money in full. They always want collateral to be used as an assurance that they will be reimbursed on some level. While the SBA backs 75% of the loan, the remaining 25% is on the bank, which is why they prefer collateral. In case you cannot collateralize a major share of a loan, your application stands a higher chance of getting rejected.
On the bright side, there are lenders who do not require a specific amount as collateral. Hence it is fine if you do not possess any real estate or expensive equipment to serve up in that space. On the other hand, the lenders will place a lien over your business assets. This is regardless of whether they contribute to the value of your business or not. In simple terms, such a lender has the right to sell off your business assets in case you do not pay back your small loan. Further, you would have to face the prospects of penalties and higher interest rates in case you failed to keep up with the schedule you agreed to in the beginning.