Securing financing is often one of the biggest hurdles for growing companies, and one of the most common requirements lenders look for is business collateral. Collateral helps protect the lender while opening the door to larger funding amounts, better rates, and more flexible terms for the business. Understanding what can be used as business collateral—and how to strategically leverage your assets—can significantly improve your chances of loan approval.
In this comprehensive guide, we will break down exactly what counts as business collateral, the types of assets that qualify, how lenders evaluate collateral, and how Crestmont Capital helps businesses secure funding even when traditional collateral is limited.
Business collateral is any asset a company pledges to a lender to secure financing. If the business cannot repay the loan, the lender may legally claim the collateral to recover their losses. Collateral reduces the lender’s risk, which is why collateral-backed loans often have higher approval rates and more favorable terms than unsecured funding options.
Collateral can be physical, financial, or even intangible, depending on the loan program and the lender’s underwriting standards. The key requirement is that the asset must have reliable, verifiable value that can be liquidated if necessary.
Collateral plays a central role in business lending because it provides a financial safety net. Whether applying for a term loan, equipment financing, SBA loan, or business line of credit, offering collateral strengthens your position.
Higher approval odds, even for newer businesses
Lower interest rates compared to unsecured loans
Longer repayment terms and more flexible structures
Larger funding amounts based on asset value
Increased lender confidence and reduced underwriting risk
Ability to leverage existing assets instead of relying solely on credit
When you understand what can be used as business collateral and how it works, you have more control over your funding options and negotiating power.
Not all collateral is treated equally. Lenders categorize collateral based on liquidity, market demand, depreciation rate, and ease of verification. Below are the most commonly accepted forms of business collateral.
Real estate is one of the strongest types of collateral because it retains long-term value and is easy to verify. This includes:
Commercial property
Mixed-use buildings
Industrial warehouses
Office space
Retail buildings
Land (developed or undeveloped)
Some cases: owner-occupied residential property
Lenders typically use appraisals or property tax values to determine the collateral’s worth. Real estate-backed funding often qualifies for the highest loan amounts and the most favorable terms.
Equipment is a popular form of collateral in industries like construction, manufacturing, medical services, and logistics. Eligible items include:
Heavy machinery
Manufacturing equipment
Medical devices
Restaurant equipment
Commercial vehicles
IT hardware
Specialized tools
Equipment financing often uses the equipment itself as the collateral, making it easier and faster to qualify.
Commercial vehicles have clear resale value and are easy to lien, which makes them ideal collateral. Examples include:
Delivery vans
Fleet vehicles
Trucks and semi-trucks
Specialized vehicles
Service vans
Company-owned cars
Lenders verify the value using vehicle history reports, mileage, resale data, and condition.
Inventory-based collateral is common for retail, wholesale, and e-commerce businesses. Examples include:
Product stock
Raw materials
Finished goods
Merchantable inventory
The challenge with inventory collateral is depreciation and seasonality, so lenders typically discount inventory value significantly (sometimes using 30–60% of wholesale value).
Accounts receivable (A/R) represents money customers owe your business. Since it will convert to cash, A/R is often used as collateral.
Examples include:
Unpaid invoices
Contracted revenue
Recurring billing clients
A/R-backed funding is common for staffing firms, transportation companies, marketing agencies, and any business with steady invoicing cycles.
Some businesses use liquid assets as collateral, including:
Business savings accounts
Certificates of deposit
Money market accounts
Stocks and bonds
Treasury bills
Because these assets can be quickly liquidated, they are among the safest forms of collateral from a lender’s perspective.
In certain specialized cases, lenders may accept IP as collateral. Examples include:
Patents
Trademarks
Copyrights
Licensing agreements
Proprietary software
The valuation process is more complex, and not all lenders accept IP collateral, but it can be valuable for tech, biotech, and creative companies.
Small business owners may pledge personal assets to strengthen their application. These can include:
Personal real estate
Vehicles
Savings accounts
Life insurance with cash value
This is more common for startups or businesses with limited commercial assets.
Understanding how lenders assess collateral can help business owners prepare documents, anticipate questions, and improve approval odds.
Here’s how the evaluation process typically works:
Lenders confirm you own the asset and that no other party has a claim on it.
Valuation methods may include:
Appraisals
Market comparisons
Depreciation schedules
Financial statements
Inventory audits
Third-party assessments
The goal is to determine fair market value or “liquidation value.”
Lenders use LTV ratios to decide how much they can lend compared to the collateral value.
Common LTV examples:
Real estate: often 70–85%
Equipment: 50–85% depending on age
Inventory: 30–60%
A/R: 70–90%
Securities: up to 90%
The easier the asset is to sell, the more value it holds as collateral.
Expect to provide:
Titles
Deeds
Equipment serial numbers
Financial statements
A/R aging reports
Inventory lists
Lenders may also require insurance coverage on high-value collateral.
Here’s a simple step-by-step walkthrough of how collateral-backed loans work.
The business submits a loan application and indicates what collateral is available.
Appraisals and documentation verify the collateral’s worth.
The lender files a lien on the asset, typically through a UCC-1 filing.
Once underwriting approves the loan, the lender issues the funds.
The business repays according to the agreed-upon terms. Collateral remains pledged until the loan is paid off.
At final repayment, the lender releases the lien and the asset becomes unencumbered.
Collateral-backed funding is suitable for many business types, but it offers particular advantages for:
Startups with limited revenue history
Businesses with lower credit scores
Companies seeking high loan amounts
Industries with valuable equipment or vehicles
Seasonal businesses
Companies needing longer terms or lower rates
Businesses seeking SBA loans, which heavily rely on collateral
Collateral can strengthen an application even if the business meets other requirements.
Many small businesses don’t have commercial property or expensive machinery. Fortunately, there are still options.
Using accounts receivable or contracts
Using business or personal vehicles
Leveraging inventory
Leveraging purchase orders
Using savings accounts
Unsecured funding options such as merchant cash advances
Crestmont Capital specializes in working with businesses that have limited collateral and need creative funding solutions.
Here are several practical scenarios to show how collateral works across different industries.
A construction firm needs $300,000 for a new project. They pledge $450,000 worth of machinery, securing strong approval odds and competitive terms.
A retail store uses $200,000 of their inventory to secure a $90,000 working capital loan during holiday season restocking.
A clinic uses diagnostic machines worth $350,000 to obtain a $200,000 expansion loan.
With $800,000 in unpaid invoices, a staffing company secures a $500,000 A/R-backed line of credit.
A software startup leverages a patented algorithm to secure a specialized collateral-backed funding package.
A small fleet of three semis valued at $420,000 is used to obtain a $250,000 working capital loan.
These examples show how businesses can use different assets—even beyond real estate—to support funding applications.
Understanding the differences can help you choose the right approach.
Higher approval rate
Lower interest rates
Larger funding amounts
Longer terms
Requires asset verification
Liens placed on collateral
Faster approvals
Higher flexibility
Higher interest rates
Lower maximum amounts
No collateral required
Often based heavily on revenue and credit
Both options have value depending on the business’s goals and financial profile.
Crestmont Capital offers customized funding solutions for businesses across all industries. Whether you have traditional collateral, unconventional assets, or limited collateral, their team can help identify the best program.
Crestmont Capital provides:
Collateral-backed term loans
Equipment financing
Working capital solutions
SBA loan guidance
Accounts receivable financing
Lines of credit
Helpful internal links:
https://www.crestmontcapital.com/business-term-loans
Their advisors evaluate your assets, application strength, and funding goals to connect you with the most appropriate lenders and most competitive terms available.
Any asset with verifiable value that can be pledged to secure a loan qualifies as business collateral. Examples include real estate, equipment, vehicles, inventory, accounts receivable, cash reserves, and certain intellectual property.
No. Many working capital loans, merchant cash advances, and revenue-based loans are unsecured. However, collateral improves approval odds and may lead to better terms.
It depends on the lender’s loan-to-value ratio. For example, a $500,000 loan may require $600,000 or more in equipment or property value, depending on the loan program.
Yes, especially for small businesses or startups lacking commercial assets. Personal property, vehicles, or savings accounts may be pledged if necessary.
The lender may seize or liquidate the collateral to recover losses. However, many lenders work with borrowers to restructure payments before taking this step.
Yes. Real estate, equipment, and accounts receivable are among the most preferred collateral types due to their predictable resale value.
If the asset has a clear title, can be easily valued, and maintains market demand, it is likely strong collateral.
If you’re preparing to apply for business financing, the next step is to evaluate what assets you can leverage. Start by gathering documentation for any equipment, inventory, vehicles, real estate, or financial accounts your business owns. Then decide which collateral options best align with your funding needs and long-term goals.
Crestmont Capital can help you determine which asset-backed programs you qualify for and guide you through the approval process from start to finish.
Knowing what can be used as business collateral gives you a strategic advantage when seeking financing. Collateral not only increases your chances of approval but also helps you secure better rates, longer terms, and larger loan amounts. Whether you plan to use real estate, equipment, inventory, receivables, or other assets, understanding the value of business collateral is essential for long-term financial planning. With expert guidance from Crestmont Capital, you can confidently leverage your assets to access the funding your business needs to grow.
Disclaimer:
The information provided in this article is for general educational purposes only and is not financial, legal, or tax advice. Funding terms, qualifications, and product availability may vary and are subject to change without notice. Crestmont Capital does not guarantee approval, rates, or specific outcomes. For personalized information about your business funding options, contact our team directly.