Collateral Documentation for Business Loan Approval
How to properly document assets (equipment, inventory, real estate) to secure your loan and improve approval odds
Last Updated: June 12, 2025
What Counts as Collateral?
Proper collateral documentation can increase your loan approval chances by up to 40% and potentially lower your interest rates. Lenders view well-documented assets as security, reducing their risk and making them more likely to approve your application.
What Lenders Look For
When evaluating your collateral, lenders assess:
- Asset Type: Some assets are more desirable than others (real estate vs. inventory)
- Valuation: Professional appraisals vs. estimated values
- Ownership Proof: Clear documentation showing you own the assets
- Condition: Maintenance records, age, and current state of equipment
- Liquidity: How quickly the asset could be sold if needed
How to Document Collateral Properly
Different assets carry different weight with lenders. Here's how they're typically valued:
| Asset Type | Loan-to-Value Ratio | Documentation Required |
|---|---|---|
| Commercial Real Estate | 70-80% | Deed, appraisal, tax records |
| Equipment & Machinery | 50-70% | Purchase receipts, serial numbers, photos |
| Inventory | 30-50% | Inventory lists, turnover rates, condition reports |
| Accounts Receivable | 70-85% | Aging reports, customer payment history |
| Vehicles | 60-80% | Title, registration, mileage, condition report |
Examples of Strong Collateral Packages
Real Estate
- Current appraisal (less than 6 months old)
- Property deed in business name
- Tax assessment records
- Insurance policies
- Photos of the property
Equipment & Machinery
- Original purchase receipts/invoices
- Serial numbers and model information
- Current market valuation
- Maintenance records
- Photos showing condition
Inventory
- Detailed inventory list with quantities
- Cost and retail values
- Inventory turnover rates
- Storage facility information
- Photos of inventory
4. Professional Valuation Process
To maximize your collateral's loan value:
- Identify qualifying assets - List all business-owned assets that could serve as collateral
- Gather documentation - Collect all ownership proofs and purchase records
- Get professional appraisals - For real estate and high-value equipment
- Organize maintenance records - Show equipment is well-maintained
- Photograph assets - Visual documentation of condition
- Prepare depreciation schedules - For tax and accounting purposes
- Update insurance coverage - Ensure adequate protection of collateral
Get Your Free Collateral Documentation Checklist
"Proper collateral documentation can mean the difference between loan approval and rejection. This checklist ensures you have everything lenders require."
Most loan rejections come down to one thing: incomplete documentation.
Enter your email below to receive our complete collateral documentation checklist (PDF)