Question

As a current or future business owner, entrepreneurs need to be able to assess collateral in order to secure a possible

loan from the bank.

True
Or
False

Answer 1

True

Step-by-step explanation:

Collateral is an asset used as a guarantee or security for the payment of a loan. It assures the lender that a borrower will pay back the loan.

If an entrepreneur applies for a business loan, the bank will most likely demand collateral. The entrepreneur will need to offer an asset, either property or motor vehicle, that will act as a guarantee for the loan. Should the entrepreneur fail in repayment, the bank can sell the asset to recover their money.

Few, if any, will lend anyone money based on a business idea alone. Many banks will demand a business proposal to be backed with some guarantee to secure funding.