FIN 3636 Chapter : Chapter 16 More Notes
Document Summary
Common types of loan collateral: accounts receivables, factoring- helps with liquidity. It is a sale: inventory- consumer borrows against their inventory. Typically, when banks take a loan with inventory as collateral, they put a lien on accounts receivable to reduce risk: real property, personal property, personal guarantees, personal assets of the owners. 16-6 sources of information: borrower specific, borrower supplied information, experience with other lenders or trade creditors, credit bureaus or ratings agencies, industry information, rma studies (see moodle, risk management associates. Information about consumers: consumer supplied financial statements, credit bureau reports, experience of other lenders, verification of employment, verification of property ownership, the web. Information about businesses: financial reports supplied by the borrowing firm, copies of board of director"s resolutions or partnership agreements, credit ratings, new york times, wall street journal, other business publications, risk management associates (rma, web. If the loan payment cannot be met, they will take the collateral.
