Once you have finally decided to pursue a secured commercial loan, you will need to properly prepare the assets that you plan to use as collateral. Here are some tips and tricks that will help to streamline the process and ease your stress.

When you apply for a secured loan, not only will the bank need to have access to all sorts of financial documents, from bank statements to balance sheets, both for you and for your business. In addition, the lender will also need to know what sort of collateral you are planning on putting up against the value of the loan you desire, as well as its worth.

The first step in making sure that you use your assets effectively is to know what exactly you can use an asset. Some are obvious, but there might be assets that you have that you would not have considered. Real estate is what most people think of when they think of collateral, but this is not always the case. If you have equity in your home, then this is a simple and effective way to secure a commercial loan, but if you are upside down in your home or have a home equity loan, then your options are going to be limited.

Another obvious piece of collateral is any cash that the borrower might have on hand. This is also the case for other low risk investments, such as CD’s or bonds. By using liquid assets to secure your loan, you are essentially putting your own money down as a way of showing the bank that you are willing to secure a business loan with your personal financial resources.

A less common, but no less viable, source of collateral can come directly from the business that you are attempting to fund. Both inventory, whether it be equipment or products for sale, and accounts receivable can be put up for collateral. This is not an easy route to take, when it comes to satisfying the needs of the lender, but it is still certainly an option that you can consider when attempting to secure a commercial loan. In the eyes of the bank, it is still an asset that can be applied to your loan should you default.

So, you have your collateral lined up in preparation for your commercial loan, now what?

You aren’t done yet! One of the biggest mistakes that potential borrowers make is not keeping detailed records of their assets. Not only does this allow you to know exactly how much you can put toward securing a loan, but it will also ease some of your stress. It takes much of the uncertainty out putting your own assets up for collateral if you know the exact values that you are dealing with. When you do this, take into consideration not just what you paid for assets at the time of purchase, but research what the current market pricing is. This is what the bank will be basing the valuation on when they determine the value of your assets against the amount of the commercial loan. This also shows the bank that you are paying attention to your own financial situation, which will only increase your chances of success.

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.