What are assets owned by a business that are used to guarantee loan repayments called?

The correct answer is collateral. Collateral refers to the assets that a borrower offers to a lender as security for a loan. If the borrower fails to repay the loan, the lender has the right to take possession of the collateral to recover the owed amount. This provides assurance to the lender that there is something of value that can be claimed if default occurs.

In the context of financial agreements, collateral reduces the risk to the lender, as it creates a form of backing for the loan. Common examples of collateral include property, equipment, or inventory that the business owns and can pledge as security.

While 'equity' refers to the ownership interest in a company, 'security' can refer broadly to any asset that can be traded or used as collateral, but is not specifically defined as the asset pledged for loans. 'Liquid assets' are cash or assets easily converted to cash, but they don’t specifically address the concept of guaranteeing loan repayments. Thus, collateral is the term that most accurately describes assets used in this context.