Collateral refers to asset or security offered to the lender to support repayment of credit exposure. It can include property, stock, receivables, machinery, deposits, guarantees, or financial assets. Lenders assess value, enforceability, ownership, insurance, and charge perfection. In MSME underwriting, it supports the bank’s secondary repayment comfort by identifying what security is available, who owns it, how it is valued and whether the charge can be enforced. For example, collateral may improve recovery comfort, but its value depends on ownership, legal enforceability, valuation quality and the bank’s charge priority. It matters because collateral can reduce loss severity, support sanction conditions and improve exposure comfort when business cash flows are volatile. The common mistake is to rely only on stated value; title defects, prior charges, documentation gaps and valuation haircuts can materially weaken security comfort.