There are different types of collateral that one can use when it comes to securing a large business loan. In many banks and NBFCs, these loans are referred to as wholesale lending, and there, the ticket size is higher.
In wholesale lending, the company borrows a large sum of money for a business venture. From the perspective of the lender, the loan is a bit risky as the bank is providing a large chunk of loan to a single borrower and any case of default will put the bank in an uncomfortable position.
To secure such a loan a promoter might take the help of a DSA partner app where a popular agent can work towards securing such loans by making the borrower a worthy customer for any potential lender.
In this blog, we will learn what are the types of collateral a promoter can offer when it comes to securing a large amount of business loan.
The Need for Collateral in Securing Higher Debt
Collateral is an important part when it comes to securing high debt, as a lot of risk gets involved from the side of a lender. A lender generally spreads the amount in smaller bets, and therefore, the risk gets distributed. However, in case of a large bet, it’s important that the ender checks all the credentials of the borrower and does proper due diligence, as any chance of default can put the lender in a vulnerable position.
Why Collateral is Important for the Lender
In this respect, a lender will be in a position to benefit from a mortgage, which will, in turn, act as security for the mortgage that the lender shall be extending to the promoter. A mortgage or collateral is an investment that guarantees that in the event of a default, the lender will be able to sell the asset and through that, the loss that occurred from the borrowing is recovered.
Types of Collateral A Business Owner Can Offer
Now, for a business owner, there are certain steps that they can follow to get a large amount of business loans. When it comes to the promoter who wants to secure a large amount of debt, they can put certain assets as collateral, which will help them to get the loan sanctioned.
Real Estate Assets of the Company
The real estate assets are a part of the company which the business has secured in its runtime. It can be an office space, a commercial factory, or some land where some projects will happen, and all these will work as collateral when it comes to getting a loan of a large amount.
For example, a real estate asset is something that has substantial value and is an appreciating asset that will work as a hedge against the loan in a stable market.
Putting Equipment and Machinery as Collateral
If the business is a manufacturing unit, then in that case one needs to deal with machinery and the factory space. A business can keep that as collateral as it allows the venture to secure a large fund and increase the operations of the business.
As the loan gets repaid, one can take back the factory floor and maintain the purchasing status, as the loan has helped to double the size of the business, which has increased the revenue.
Inventory as a Collateral
A business individual can also keep inventory as collateral as the sales happening from that inventory will end up in the lender’s offer. It’s applicable to retailers who can put raw materials or finished goods as collateral.
Pledging Equity of the Business
The role of pledging shares is important as it enables a person to take a large chunk of loans by pledging some percentage shares to the bank. Here, a company can get in touch with a DSA; for those who don’t know DSA in full form, it stands for Direct Selling Agent, and they are the ones who can secure deals for the business.
When it comes to getting a loan, it’s one of the best options if the company claims a higher market valuation, and that helps the business to keep up with the industry and further improve the venture, eventually paying out the loan and interest and recovering the pledged share.
These are some of the ways through which a business owner can get a large loan amount with the right collateral asset as a hedge to the lender.
