Collateral is something used as security for repayment of a loan, to be forfeited in the event of a default.
Here's an example: if I needed to take a loan out to start a new business (a flower shop, just for example), the bank may give me a loan only if I put my house up as collateral for the loan. This means that if my new flower shop isn't successful and I cannot pay my loan back, the bank can take ownership of my house.
Any asset (things that you own with value) can be used as collateral - - - home, car, jewelry, etc). A business could own machinery or other things (like inventory) that may be accepted as collateral.