How much in collateral do you need to apply a business loan?

Answer 1

As a general rule the fair market value of the collateral will have to exceed the amount of the loan by an amount sufficient to cover the costs of seizing and selling the collateral for an amount sufficient to pay off the loan.

You can apply this "rule" to various types of collateral to come up with some figures.

If a savings account within the same bank the loan could equal the savings account since the savings account could be easily "seized" to pay off the loan. You could probably borrow 100 cents on the dollar but you'd have to "freeze" the savings account.

If you are purchasing an asset for use in the business the asset itself can act as collateral if your credit is otherwise good. In this case you'd put about 20% down and the bank would loan 80%. Clearly the collateral here is worth more than the loan.

If you are using raw undeveloped land for collateral you'd probably be lucky to be able to borrow half its appraised value because it is illiquid, its value might drop and the costs of selling it are high.

Answer 2

It depends on the type of loan you are applying for, and the strength of the business you are buying/starting. Usually the SBA wants to see 20% of your funds put into the project. This ensures that you have something invested in the businesses success. Some angel Investors will give 100% for a very strong business plan that allows them some portion of the profits. If you are buying a business, go to a business broker and they will help with the loan. Otherwise go to any lender and see what they say.