Collateral Note

Collateral note is a promissory note secured by the pledge of specific company assets. Basically, when a business signs a promissory note while receiving funding, they are promising to pay back the loan on a certain timetable earlier agreed upon. To guarantee this note, they use company assets as collateral. The pledging of assets gives the bank some security if, for some reason, the borrower is unable to make payments. In this case, the bank is able to seize and/or sell the pledged assets to gain back some or all of the money they lent out.

Collateral is a lenders main source of security when lending money. Without collateral, banks and other lending institutions would never make money because they would be taken advantage of by deadbeat borrowers. Collater guarantees that a lender will be able to salvage at least some of the capital that they lend out.

onEntrepreneur

onEntrepreneur is an online magazine centered on the world of business, entrepreneurship, finance, marketing, technology and much more. We are regularly updated – sign up with our newsletter to send the updates directly to your inbox.

Leave a Reply

Your email address will not be published.