What is collateral in business lending?

2 min read

Pledged assetWhat it is

Lower rateWhy lenders want it

None neededUnsecured

What it means

Collateral is security a borrower offers so the lender has something to fall back on. It can be a specific asset under a fixed charge, a pool of assets under a floating charge, or property. Because collateral lowers the lender's risk, secured lending usually carries a lower rate — but the pledged asset is at stake if you default.

What this means for your company

Pledging collateral ties up an asset and registers a charge on your public record, which can limit future borrowing. Unsecured lending needs none — approval rests on trading and affordability. Credicorp's core lending is unsecured with no personal guarantee, so no asset and no home is on the line. Weigh the rate saving of secured against the freedom of keeping assets unencumbered.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

What can be used as collateral?

Commonly property, vehicles, equipment, stock or a general charge over company assets. Some lenders also accept invoices or intellectual property. What qualifies depends on the lender and the asset's value and liquidity.

Is collateral the same as a personal guarantee?

No. Collateral is a company asset pledged as security; a personal guarantee is a director's personal promise to repay. A loan can require one, both or neither — always check which applies before signing.