What can be used as collateral for a business loan?

Common collateral includes commercial real estate, equipment, business vehicles, inventory, accounts receivable, and cash savings or CDs. Some lenders also accept a blanket lien on all business assets (a UCC-1 filing) or a personal asset like your home. The more liquid and easy to resell an asset is, the more lending value it carries.

Do all business loans require collateral?

No. Unsecured term loans, many business lines of credit, and merchant cash advances do not require specific collateral, though lenders often offset that risk with a personal guarantee and higher rates. Secured loans, SBA 7(a) loans above $50,000, and equipment financing typically do require collateral.

How do lenders value collateral?

Lenders apply a 'loan-to-value' discount, lending only a percentage of an asset's market value. Real estate may support 70-80%, equipment 50-70%, and inventory or receivables often 50% or less. They use liquidation value (what the asset would fetch in a quick sale), not what you paid for it.

Is a personal guarantee the same as collateral?

No. Collateral is a specific asset pledged against the loan. A personal guarantee is a written promise that you will repay personally if the business cannot, putting your personal assets and credit at risk. Many 'unsecured' business loans still require a personal guarantee.

Business Loan Collateral: What Counts and What Doesn't

A practical guide to business loan collateral: what assets lenders accept, how they value them, and when you can qualify for unsecured financing instead.

Business loan collateral is any asset a lender can seize and sell if you default — most commonly commercial real estate, equipment, vehicles, inventory, or accounts receivable. Cash, CDs, and a blanket lien on business assets also count. Personal credit, goodwill, and unsigned contracts generally do not.

Collateral is the safety net that lets a lender say yes to a deal it might otherwise decline. Understanding what your business can pledge — and how little of an asset's sticker value actually counts — is the difference between walking into an application prepared and getting blindsided by a low offer. This guide breaks down what qualifies, how lenders value it, and when you can skip collateral entirely.

What counts as business loan collateral?

Lenders favor assets that are easy to value and easy to sell. The closer an asset is to cash, the more lending power it carries. Here is how the common categories stack up.

Typical collateral types and how much lenders will advance against them
Asset type	Typical loan-to-value	Why lenders like (or don't like) it
Cash, CDs, savings	90-100%	Effectively risk-free; instantly liquid
Commercial real estate	70-80%	High value, stable, but slow to sell
Equipment & machinery	50-70%	Depreciates; resale market varies by type
Business vehicles	50-70%	Clear title and resale value, but depreciates fast
Accounts receivable	70-90%	Good if customers are creditworthy and invoices recent
Inventory	20-50%	Hard to sell quickly; value drops in liquidation

The pattern is consistent: the harder an asset is to convert into cash quickly, the steeper the discount. A $100,000 piece of specialized equipment might only support a $55,000 loan, because in a forced sale the lender assumes it will fetch far less than market price.

Lenders value collateral at liquidation, not retail

The number that matters is not what you paid or what the asset is "worth" — it's what a lender could recover in a fast sale. That's why they apply a loan-to-value discount. Plan your ask around the discounted figure, not the full appraised value.

What does NOT count as collateral?

Plenty of things business owners assume have value carry none in underwriting:

Goodwill and brand value — real, but unsellable in a default scenario.
Projected revenue or pipeline — future income isn't an asset you can pledge today.
Unsigned contracts or letters of intent — only executed, invoiced work counts toward receivables.
Leased equipment — you don't own it, so you can't pledge it.
Personal credit score — it influences approval and rate, but it is not collateral.

A strong credit profile and healthy cash flow can reduce or eliminate the collateral a lender requires, but they don't substitute for a pledged asset when one is demanded.

How is secured financing different from unsecured?

Secured loans are backed by a specific asset; unsecured loans are backed by your creditworthiness and usually a personal guarantee. Each has a clear place.

Pros

Secured loans carry lower rates and longer terms
Easier to qualify for larger amounts
Collateral can offset weaker credit or shorter time in business

Cons

You risk losing the pledged asset on default
Appraisals and lien filings slow funding
A blanket UCC lien can block future borrowing against the same assets

If you have a strong track record and only need a modest amount, unsecured term loans or a business line of credit may make more sense than tying up an asset. When the deal is large or your credit is thinner, pledging collateral is often what gets it funded.

What about SBA loans and collateral?

SBA loans deserve a special note. The SBA sets guidelines, and individual lenders add their own overlays on top, so requirements vary by bank. As a general rule, SBA 7(a) loans above $50,000 require collateral to the extent the borrower has it — but a loan won't be declined for collateral alone if every other factor is strong. The SBA expects lenders to take available business and personal assets (including real estate with substantial equity) rather than leave a loan fully unsecured. Explore the details on our SBA loans page before applying.

How do collateral-backed financing options compare?

Some products are built around a specific asset, which changes how collateral works entirely:

Equipment financing

The equipment you're buying serves as its own collateral. Because the lender can repossess the machine, approval is often faster and down payments smaller. See equipment financing.

Invoice factoring

You sell unpaid invoices at a discount; the receivables themselves are the collateral. Good for businesses with slow-paying B2B customers. Learn more about invoice factoring.

Working capital & advances

Working capital loans and a merchant cash advance are typically unsecured by specific assets but rely on cash-flow strength and a personal guarantee instead.

A personal guarantee is not the same as collateral

Even "no-collateral" loans usually require a personal guarantee, meaning your personal assets and credit are on the line if the business can't pay. Read the guarantee language as carefully as any lien.

What will a collateralized loan actually cost?

Collateral lowers the lender's risk, which usually means a lower rate than a comparable unsecured loan. Use the calculator below to estimate payments across a realistic rate range, then refine your numbers with our payment calculator.

Estimate your monthly payment

A representative estimate at 8%–28% APR. Actual rates and terms vary by business and product.

Amount

Term (months)

$4,670– $3,041 / mo (est.)

Get your asset documentation ready early

Before you apply, gather titles, recent appraisals, equipment invoices, and an up-to-date accounts-receivable aging report. Having clean documentation speeds underwriting and often improves your loan-to-value treatment.

The bottom line

Collateral isn't a hurdle to fear — it's leverage. Knowing which of your assets carry real lending value, and how much of that value survives a liquidation discount, lets you ask for the right amount and negotiate from a position of strength. And if pledging assets doesn't fit your situation, unsecured options exist for businesses with the cash flow and credit to support them.

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