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BUSINESS FINANCING GLOSSARY

Collateral

An asset pledged to secure a loan that the lender can seize if you default. Equipment, real estate, receivables, and inventory are common forms.

Go deeperSecured vs. unsecured ▸

Related terms

Secured Loan→A loan backed by collateral the lender can claim on default. Lower rates than unsecured debt, because the lender takes less risk.Default→Failing to meet the terms of a loan — usually missed payments, but also broken covenants. It can accelerate the full balance and trigger collateral seizure.Inventory Financing→Capital used to buy stock, with the inventory itself often serving as collateral. Frees cash for businesses with seasonal or bulk purchasing needs.Invoice Financing→Borrowing against unpaid invoices used as collateral, while you still collect from your customers yourself — unlike factoring, where the factor collects.Loan-to-Value (LTV)→The loan amount as a percentage of the collateral’s value. Lower LTV means more equity cushion for the lender; CRE often runs 65–90% depending on structure.Revenue-Based Financing (RBF)→Capital repaid as a percentage of revenue until a set amount is met, with no fixed term and no collateral. Payments flex up in strong months and down in slow ones.

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