Collateral

What is Collateral?

Collateral is an asset pledged by a borrower to secure a loan, which can be seized by the lender if the borrower fails to repay. It reduces the risk for the lender by providing a form of security and can include various assets such as property, equipment, or inventory. In startups, collateral may be required for securing business loans, credit lines, or other financing.

Types of Collateral

• Real Estate: Property such as land or buildings used as collateral for a loan.
• Inventory: Products or materials held by the business, which can be pledged as security.
• Equipment: Machinery or other valuable assets that can be used to secure financing.

Related Terms and Concepts

Loan, secured debt, financing, credit risk.