Collateral
An asset pledged to secure funding, which a lender can claim if the loan isn't repaid.
Collateral is an asset – such as equipment, real estate, or inventory – pledged to secure a loan. If the borrower fails to repay, the lender may have the right to claim the collateral to recover their losses.
Some funding types, like equipment financing, are inherently secured by the asset being purchased. Other programs may be unsecured, meaning they don’t require specific collateral, though they may still involve a personal guarantee or a general lien on business assets.
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