A documented right to property owned by a debtor and granted to a creditor is referred to as a ‘lien’. Although relatively a simple definition, it gets much more complicated when used in various contexts. The word is most commonly used in business and is defined as the right to take property of a borrower when the borrower fails to fulfill their promise to pay the amount borrowed back to the lender.
Secured loans are notes whereby collateral acts as the security in case the borrower fails to pay back the note. The most common type of secured loan is an auto loan, others include short term notes for equipment, mortgage notes, lines of credit used to address receivables or inventory. At closing, not only is a note signed, but a collateral agreement and a security agreement are signed and attached to the note. These additional documents make the entire loan a secured loan.
The Small Business Administration (SBA) is an agency of the federal government that provides loans, counseling and procurement opportunities with the federal government. Simply stated: “The SBA helps Americans start, build, and grow businesses”. No other resource exists that is as dynamic and beneficial to the small business owner as the SBA.
There are many different types of bank loans, each having their own respective purpose. All bank loans are categorized into two distinct groupings; secured and unsecured loans. Within in each category of loans there are several different sub-types of bank notes used to make a loan. Both categories require the owner of the small business to provide a personal guarantee to ensure the loan is paid back.