Need a fast business loan?
Small businesses are at the heart of our economy, and every small business needs loans. That includes restaurants, construction companies, general contractors, car business owners and more.
Small collateral loans help you pay for inventory, overhead, advertising, insurance, etc. They help you meet expenses, whether you’re:
- Starting a new business
- Launching a new product
- Opening a new store
- Or just want to keep growing
HOW DOES SMALL COLLATERAL LOANS WORK?
Let's first discuss what collateral loans are.
A collateral is a piece of property that is used as security for a loan and is accepted by lenders. A property may be used as collateral, or an asset may be used to secure the loan if that is the purpose of the loan. Collateral serves as a form of protection for the lending institution. The lender can sell the collateral to recoup some or all of its losses if the borrower defaults on their loan payments.
How Collateral Works
A lender wants to make sure you are capable of repaying a loan before issuing one. For this reason, it is common for them to require security. Collateral serves as a form of security that reduces lenders' risks. Borrowers are ensured that their obligations are met by collateral. A lender can seize the collateral and sell it, using the proceeds to pay off the unpaid portion of the loan if the borrower defaults. Legal action may be taken against the borrower by the lender to recoup any remaining balance.
In addition to the types of collateral mentioned above, collateral can also take on many forms. Collateral generally reflects the nature of the loan. For instance, a mortgage is secured by a residence. On the other hand, a vehicle is collateralized for a car loan. Similarly, other nonspecific loans may be collateralized with assets. Cash deposits for secured credit cards may be as high as the credit limit-for example, $500 for a $500 credit limit.
The interest rates on collateralized loans are usually much lower than those on unsecured loans. The claim of a lender to a borrower's collateral is called a lien. It is a legal right or claim against an asset to satisfy a debt. Due to the threat of losing their home or other assets pledged as collateral if they default, the borrower has a compelling reason to repay the loan on time.
Examples of Collateral Loans
Mortgages are loans for which the house serves as collateral. The mortgage servicer can begin legal proceedings if the homeowner stops paying his mortgage for at least 120 days. When the lending institution takes possession of the property through foreclosure1, it can be sold to make good on the remaining loan principal.
Home Equity Loans
In addition, a home can also be used as collateral on a second mortgage or home equity line of credit (HELOC). If the loan amount does not exceed the available equity, the loan will not be used. In the case of a home valued at $200,000, but with a $125,000 primary mortgage, a second mortgage or HELOC would be available only up to $75,000.
Borrowing against collateral is also a factor in margin trading. By using the balance on the investor's brokerage account, an investor can borrow money from a broker to buy shares. By increasing share purchasing power, a loan increases the potential gains for an investor if the share price increases. On the other hand, the risk is also multiplied. Should the stocks fall in value, the broker must be paid the difference. In such a case, the account serves as collateral if the borrower does not pay for the loss.
How can you secure a small collateral loan?
It’s easy. Securing a business loan with collateral goes like this:
Step #1: You put up assets as collateral.
Step #2: We do not check credit.
Step #3: We make an offer for a commercial business loan on the value of collateral based on
Step #4: You take the money and do use it any way you need or desire.
Step #5: You pay back the loan and keep growing your business.
What is collateral?
Collateral is something you or your business owns that can be used to back up a loan. If you don’t return the money borrowed, the lender keeps the assets instead.
Collateral could be:
- A vehicle
- Musical Instruments
Why do we need collateral?
Collateral lending protects the lender—that’s us—from default. We have to be sure we can recoup the value of the loan—whether or not you’re able to pay back the principal plus interest.
If you don’t reimburse us, we keep the assets. If you do pay us back, you lose nothing.
Don't have many assets?
No worries. Banks are famous for being stingy. We’re not. Fla-Pawn makes it easy to get a secured collateral loan. We offer commercial business loans for far less collateral than traditional lending institutions.
Don't have the best credit?
That’s all right. At Fla-Pawn, we do not check credit scores. Also, we offer small business startup loans to businesses. This can help you overcome one of the biggest challenges to growing your small business. In other words, we keep the economy going by putting more cash in the hands of entrepreneurs.
How much will you get?
That depends on how much you need and how likely you are to default. How do we figure out how risky a short-term loan is? First of all, you should know that we do not check credit scores. Then, we appraise your assets. No matter what, you’ll get a better offer than you would with a traditional bank or lender.