Sometimes loans will be made solely on the business's signature. More frequently, banks will require collateral to secure the loan.
Acceptable collateral can take a variety of forms.
The type and amount of collateral necessary in a given situation will depend on the particular bank's lending policies and the business's financial state. While the law makes some subtle distinctions as to when each of these sureties becomes liable for the borrower's debt, in essence these parties will be expected to pay back the borrowed funds if the borrower fails to do so. The bank may or may not require sureties to pledge their own assets as security for their promise to pay upon the borrower's default. This will depend to a great extent on the surety's own financial situation. Assigning a lease as a form of security is particularly appropriate for franchise situations.