collateral is something you own which you give your lender title to until you pay back all the money you borrowed, plus interest. If you fail to repay the loan, the lender keeps the collateral.Basically, equity is the difference between the market value of property you own and what you owe against it, plus any costs necessary to turn the asset into cash.     Example: Eric owns a car worth $9,000, but owes the bank $4,000. His equity in the car is $5,000. To convert the equity to cash, he could try to sell the car for $9,000 cash and pay off the bank loan, leaving him $5,000. If he borrows against the car, hed probably be lent less than $5,000, since banks dont like to finance 100% of an assets value.     5. Supporters     Many types of businesses tend to have loyal and devoted followers-in many ways their customers care about the business as much as the owners do. Examples are as myriad and varied as the likes, loves and desires of the human community. A health food restaurant, an exercise club, a motorcycle shop, a family counseling facility, a solar heating business, a religious bookstore or a kayak manufacturing shop all could work, assuming you can find your audience.     As with the discussion about family members (Section C2, above), people who care about what you do may well be willing to support you on better terms than would a commercial investor. No matter what your business or business idea, think about who you know or can get to know and who really cares about what you plan to do. Share your idea with these people and be ready to listen to them. Youll surely get lots of good ideas, and you may be surprised at how easy it is to raise money for what people perceive as an honest and needed endeavor.     6. Banks     When asked why he robbed banks, Willie Sutton said, "Because thats where the money is." For the same reason, banks are high on the list of potential sources people ask about for business funding. Unfortunately, as far as a small business is concerned, banks act cautiously when lending out money. This makes sense when you remember that it isnt their money.     While there are other bank-like institutions in the community, this discussion applies to commercial banks that lend to businesses and individuals. Savings and loans (thrifts) traditionally take in money from individuals and lend only to individuals who own real property; however, the banking and savings and loan industries are changing rapidly and that may change. Credit unions normally lend only to individuals in small amounts; generally speaking, they dont lend to businesses.     Banks always want to see a written business plan along with your loan application. Banks are financial intermediaries. They pay interest to account holders to attract deposits, which they lend out to people like you. When lending, they charge enough interest to pay for their cost of funds and produce a profit. Any transaction you have with a bank will be a loan and will come with a repayment schedule. Banks try to minimize risks by making sure you have enough assets to pay them back, even if your business does badly. They dont make equity investments in businesses.     Some commercial banks work closely with the Small Business Administration (SBA) in offering loan guarantee programs. If you want a loan but dont qualify under the banks normal guidelines, the banker may suggest that you apply for an SBA guaranteed loan. If youre approved, the SBA guarantees the bank that you will repay the loan and the bank loans you the money. While this program can work for start-ups, it is most used by business owners wanting to expand a successful business. Ask your banker if he knows about the SBA guarantee program. (See Section F1, below, for background on the SBA.)