OVERVIEW

Access to credit facilities is crucial for all businesses, regardless of their size. From a commercial standpoint, having a credit facility at one's disposal offers your business space to compete, grow, and innovate – the three main factors at work in a business's survival in a competitive marketplace. However, accessing credit is not always a walk in the park. When granting credit facilities, financial institutions tend to be both rigid and stringent in their application of their various rules, and more often than not they require collateral in order to protect the funds that they are lending.

In Indonesia, two types of collateral security are recognized, namely: asset-backed lending (jaminan kebendaan) and guarantees (jaminan perseorangan). Examples of asset-backed lending include mortgages, hypothecation, pledges, and fiduciary.[1] While a guarantee is defined as a personal guarantee, corporate guarantee, bank guarantee, promissory note, etc. In practice, obtaining credit via an asset-backed lending mechanism is simpler and faster than utilizing a guarantee mechanism. However, for small-to-medium sized enterprises, as well as cooperatives, especially those that do not possess sufficient assets to collateralize, obtaining credit via an asset-backed lending mechanism can pose a big challenge.