Collateral is something that helps secure a loan. When you borrow money, you agree that your lender can take something and sell it to get their money back if you fail to repay the loan. Collateral makes it possible to get large loans, and it improves your chances of getting approved if you are having a hard time getting a loan.
When you pledge collateral, the lender takes less risk, which means you are more likely to get a good rate.
Read more about SBA loan collateral requirement