Many borrowers confuse Courtesy Deposits with collateral. Let’s clarify the key distinctions and why it matters for your funding journey.

On the surface, a Courtesy Deposit might feel like collateral — it involves money and is linked to your loan. But the two are fundamentally different.

Collateral is something the borrower owns and pledges to the bank as security for a loan. If the borrower defaults, the bank can seize that asset. Think of real estate, vehicles, or inventory.

Courtesy Deposits, however, are not pledged, do not belong to the borrower, and cannot be seized. They are held in the lender’s institution, but controlled by a third party. The bank can see the funds but has no legal claim to them. That visibility, not accessibility, is what changes how lenders see your proposal.

In practical terms: Collateral is risk coverage. Courtesy Deposits are confidence builders.

This distinction is critical. If your lender is demanding collateral and you don’t have enough, a Courtesy Deposit might offer a solution — not by replacing collateral, but by changing the lender’s risk perception in a compliant, neutral way.