Collateral
Something pledged as security for the repayment of a loan, which can be forfeited in the event of default. Examples include real estate, vehicles, cash and investments.
Related terms
Margin
A deposit required to open and maintain a position, such as a forward contract or option. Margin serves as collateral to secure the transaction and protect against counterparty default risk.
Read full definitionLoan-to-Value (LTV)
The size of a loan expressed as a percentage of the value of the asset securing it. A lower LTV means more borrower equity and generally lower risk and pricing for the lender.
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Revolving Credit Facility
A flexible credit line a business can draw down, repay and reuse up to an agreed limit. Interest is charged only on the amount outstanding, making it useful for managing fluctuating working-capital needs.
Read full definitionTrade Finance
Funding and risk-mitigation tools, such as letters of credit and guarantees, that help businesses buy and sell goods across borders by bridging the gap between paying suppliers and getting paid by customers.
Read full definitionInvoice Finance (Factoring)
Borrowing against unpaid invoices to release cash tied up in receivables. The lender advances a percentage of each invoice up front and collects, or is repaid, when the customer pays.
Read full definitionMerchant Cash Advance
A lump-sum advance repaid as a fixed percentage of a business’s daily card takings. Repayments flex with sales, so they rise in busy periods and fall in quieter ones.
Read full definitionAsset Finance
Funding that lets a business acquire or release cash from equipment, vehicles or machinery, through leasing, hire purchase or refinancing, spreading the cost over the asset’s useful life.
Read full definitionCommercial Mortgage
A long-term loan secured against business or investment property. It is used to buy premises or refinance existing property, with the building serving as collateral.
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