This worksheet from Canyonmoor Lending Group in Montrose, Colorado shows how a funder can turn equipment, receivables and stock into a lending value, how to compare that value with a loan, and what to do when collateral falls short. Every rate in it is invented for illustration; partners set their own advance rates and decide.
How Much Collateral Is Needed for a Business Loan? The Formula
Lending value = market value of the asset × the funder's advance rate. Coverage = total lending value ÷ the loan amount. A coverage of 1.0 means the pledged assets, counted at lending value, equal the loan. Funders set their own advance rates by asset type, age and how easily it sells, and some lend with less than full coverage when cash flow is strong.
- List each asset: equipment, vehicles, receivables, stock.
- Write a realistic market value, not the purchase price.
- Apply an advance rate to each (the rates below are invented).
- Add the lending values and divide by the loan amount.
- If coverage falls short, note what else could make up the gap.
Builder Row: Used Excavator and Dump Trailer Against a Term Loan
Illustration only, invented figures: a builder pledges a used excavator worth $80,000 at an invented 60% advance rate, a lending value of $48,000, and a truck and trailer worth $42,000 at an invented 65%, a lending value of $27,300. Together that is $75,300 against a $100,000 loan, a coverage of 0.75 (our arithmetic).
Construction counted 278 employer establishments in Montrose County, CO in 2023 (County Business Patterns 2023), and machines are the collateral a builder can most readily pledge. The article on skid steer terms covers how age and hours affect financing.
Repair Shop Row: Receivables and Parts Stock Against a Line
Illustration only, invented figures: a repair shop has $52,000 in receivables, of which $9,000 is more than 90 days old and is left out. The remaining $43,000 at an invented 75% gives $32,250; $30,000 of parts at an invented 40% gives $12,000. Together $44,250 against a $60,000 line is a coverage of 0.74 (our arithmetic).
Old receivables and slow stock count for little or nothing, so cleaning up the aging report before a request can raise the lending value without adding a single asset.
Clinic Row: When Equipment Covers Only Part of the Loan
Illustration only, invented figures: a clinic seeking $150,000 for an expansion pledges equipment worth $120,000 at an invented 50%, a lending value of $60,000, leaving $90,000 uncovered (our arithmetic). A partner may still lend on the strength of collections, ask for a personal guarantee, ask for a larger down payment, or split the request into an equipment loan and a smaller unsecured term loan.
Loan Term and Amortization Next to Collateral That Wears Out
Equipment loses value as it ages, while the loan balance falls with each payment. A term that keeps the balance below the machine's declining value protects both sides; a term that runs past the machine's useful life leaves the business paying for something that no longer earns. That is why equipment terms are set against working life, and why older machines draw shorter terms.
Reading Your Own Result Before a Funding Request
- Coverage near or above 1.0: collateral can support a secured offer, if cash flow carries the payment.
- Coverage well below 1.0: expect questions about cash flow, a guarantee or a larger down payment.
- Assets already pledged elsewhere: they may not count again; list existing liens.
- Personal assets: a guarantee can reach them even when they are not pledged directly.
Phone (970) 238-5206 or send the web form with the asset list and the amount. The term loan page and the equipment page explain how secured funding is structured, and the contractor page covers builders' machines.
Blanket Liens, Specific Liens and Assets Already Pledged
A specific lien names one asset, such as the excavator an equipment loan paid for. A blanket lien covers all business assets, present and future, and is common on lines of credit and some term loans. If an earlier funder already holds a blanket lien, a new funder may treat the same assets as unavailable, or ask the first funder to agree to share or subordinate its position. A search of Colorado Secretary of State filings shows which liens are on record against the business.
List every existing loan, lease and advance on the request, with what each one secures. A partner finds these filings anyway, and a complete list saves a round of questions.
Where an Appraisal or Dealer Quote Fits In
The worksheet's weakest input is market value. A dealer's written quote for similar used equipment, an auction comparison or a formal appraisal gives a partner a figure it can rely on. For receivables, the aging report is the evidence; for stock, a recent count at cost. The partner sets the advance rates; the owner's job is to bring values a partner can check.
By Canyonmoor Lending Group · Updated