Property or assets that are pledged as security for a loan or credit.
Collateral is an asset or property that a borrower pledges to a lender as security for a loan. It serves as a form of protection for the lender in case the borrower defaults on the loan. Small business owners may encounter the concept of collateral when seeking financing, such as a business loan or line of credit. By offering collateral, such as real estate, inventory, or equipment, business owners can increase their chances of obtaining funding and potentially secure more favorable loan terms. Collateral provides lenders with reassurance that they have a means to recover their investment in the event of non-payment. It's important for small business owners to carefully consider the value and quality of collateral they can provide when seeking financing options.