Collateral is an asset that a borrower offers to support a loan. It gives the lender a form of security: if the borrowing is not repaid, the lender may have a claim over that asset. Collateral is the asset behind what is often called secured lending.
Common examples
- Property owned by the business.
- Equipment, vehicles or machinery.
- Stock or other valuable assets the company holds.
Secured versus unsecured
Lending backed by collateral is described as secured. Lending without it is unsecured, and the lender relies more heavily on the strength and affordability of the business itself. Each approach has trade-offs in terms of what is required and how the facility is structured.
Our approach
Credicorp lends only to UK limited companies and LLPs for business purposes. Importantly, we do not take personal guarantees from directors; the loan is to the company. Whether any security applies to a facility is set out clearly before you accept, so you always know what you are agreeing to. If you are unsure what an offer involves, ask our team to walk you through it.
See also: What does unsecured mean?, What is security on a loan? and Asset finance vs a business loan: how to compare them.