Lenders will ask you to provide a security for your business loan before approving any funding. The security can come in a form of asset that you own. The purpose of the security is to cover for any repayments you cannot fulfill.
What Do Lender See as Security
Most business loans have properties as their assets. This comes in the form of rural land, commercial or residential property, depending on the borrower and agreed terms.
There are cases where lender allow balance sheets as securities to their loans. Others also accept equipment, cars or even an accredited franchise. In some instances, lenders use the value of the business as a form of security for commercial business loans. It depends on your type of loan and what the lender thinks will be applicable or suitable to cover for amount borrowed.
What if You Want to Sell Your Asset?
You can still sell your asset during the loan term given that the bank or the lender gave you consent. In most cases, you will need to provide an alternative security to assure the lender. Make sure you consult first a financial planner or expert to see your options. This will help you decide if selling your option and risking your loan will be the best alternative for you and your business.
What Happens If You Cannot Make Repayments?
If you cannot settle your loan repayments then you risk allowing the bank or lender to sell your asset.
In case you don’t have security for your business loan, your next best choice is an unsecured funding. This is where Gapcap comes in. We provide funding or capital options for small businesses in a faster and easier way than traditional means. Check out our website for more information.