Loans can be either secured or unsecured. An unsecured loan does not require any form of security, other than a signature and credit reputation. However, most loans require larger security, including some or all of the business assets.
There are many different types of security:
- Co-maker – A co-maker enters the loan with the borrower and is liable for the repayments.
- Guarantor – A guarantor is someone who signs a note to improve the borrower’s credit, thereby making themselves liable for the borrower’s debt incase he/she fails to pay up. The endorser might also be asked to provide additional security. Most commercial loans require a guarantor before approval of a loan.
- Warehouse receipts
- Real estate
- Accounts receivable
- Savings accounts
- Life insurance
- Stocks and bonds