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Borrow against assets you already own
A Rbcpay collateralized loan is secured by property, equipment, vehicles or receivables that you pledge for the term of the loan. Every term is agreed and recorded in a written agreement before a single dollar is disbursed.
What a collateralized loan is
A collateralized loan is one where the borrower grants the lender a security interest in specific assets. Those assets, the collateral, stay with the borrower and continue to be used, but they secure repayment of the loan.
Because the loan is secured, both sides know exactly what is at stake from the outset. The collateral is identified item by item in the agreement, along with its approximate value, and the borrower undertakes to keep it free of other claims for the duration.
What is fixed in writing before funds move
- The exact assets pledged as collateral, described individually
- The amount advanced and the purpose it is advanced for
- The interest rate, the term, and the repayment schedule
- What counts as an event of default and what follows from one
- The law that governs the agreement and where disputes are heard
How a collateralized loan works
Five stages, from first enquiry through to release of the security interest.
Enquiry and review
You tell us the amount you need, what it is for, and what you can pledge as security.
Collateral valuation
The assets you propose are identified individually and their approximate value is established.
Terms agreed
Amount, rate, term, repayment schedule and default provisions are set out in a written agreement.
Signing and disbursement
Both parties sign, the security interest attaches, and the funds are disbursed.
Repayment and release
You repay on the agreed schedule. Once the balance is cleared, the security interest is released.
What can be pledged as collateral
Collateral is identified item by item in the agreement, with a description, a type and an approximate value for each entry.
Real estate
Commercial property and land, identified by address, secured by a registered interest in the title.
Equipment
Machinery and plant, identified individually by make, model and serial number so there is no ambiguity about what is pledged.
Vehicles
Commercial vehicles and fleet, identified by make, model and vehicle identification number.
Accounts receivable
Outstanding invoices and book debts pledged as security, with the balance established at the time the agreement is made.
What the borrower confirms about the collateral. That it is, and will remain, free and clear of all liens and encumbrances except anything disclosed to the lender in writing; that adequate insurance will be maintained on it throughout the term; and that the lender will be named as loss payee on that insurance.
What every loan agreement sets out
The figures differ from one agreement to the next. What does not differ is the list of things that must be settled and written down before signing.
- Loan amount
- The principal advanced to the borrower, stated in the agreed currency.
- Loan purpose
- What the proceeds may be used for. The borrower agrees to use them only for that purpose.
- Interest rate
- The rate applied to the outstanding principal, stated per annum.
- Loan term
- The length of the loan, from disbursement through to maturity.
- Disbursement date
- The date the funds are advanced and the security interest attaches.
- Maturity date
- The date by which the balance must be cleared in full.
- Repayment schedule
- How and when principal and interest are paid across the term.
- Late payment fee
- What is charged on an overdue amount, and from when.
- Prepayment
- Whether the loan may be repaid early, and on what notice.
- Collateral schedule
- Every pledged asset, listed individually with its type and approximate value.
- Governing law and venue
- The law the agreement is construed under and where any dispute is heard. This is set per agreement and depends on the parties involved.
Borrower obligations
For the life of the loan, the borrower agrees to:
- Use the loan proceeds only for the stated purpose
- Make every payment when it falls due
- Maintain and insure the collateral, naming the lender as loss payee
- Not sell, transfer or further encumber the collateral without the lender’s prior written consent
- Provide financial statements and other information as reasonably requested
Events of default
An event of default includes, but is not limited to:
- Failure to make payments when due
- Misrepresentation by the borrower
- Insolvency of the borrower
- Unauthorised transfer of collateral
- Breach of any other term of the agreement
On default, the lender may declare the entire outstanding balance immediately due and payable, and may exercise all rights and remedies available under the agreement and at law.
Common questions
Do I keep using the assets I pledge?
How is the value of my collateral established?
Can I pledge more than one type of asset?
Can I repay early?
What happens if I miss a payment?
What happens when the loan is repaid?
Which law governs the agreement?
Talk to us about a collateralized loan
Tell us the amount you are looking for, what it is for, and what you can offer as security. We will come back to you on whether it is something we can structure.