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.

Collateral is one piece of building full business creditworthiness.

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

Combine with owner investment for strongest applications.

Examples of Strong Collateral Packages

4. Professional Valuation Process

To maximize your collateral's loan value:

1. Identify qualifying assets - List all business-owned assets that could serve as collateral
2. Gather documentation - Collect all ownership proofs and purchase records
3. Get professional appraisals - For real estate and high-value equipment
4. Organize maintenance records - Show equipment is well-maintained
5. Photograph assets - Visual documentation of condition
6. Prepare depreciation schedules - For tax and accounting purposes
7. Update insurance coverage - Ensure adequate protection of collateral