Lending money and securing loans

This form of business financing is referred to as asset-based lending. Asset-based lending occurs when a loan is granted to a firm solely on the value of assets pledged as collateral.

Lending money and securing loans

Lending Money and Securing Loans Lending Money and Securing Loans 9 September Money Money and Securing Loans A company can finance its activities by selling shares or by raising money from banks or other money-lending institutions.

If the company is granted a loan, the lender may become a debenture-holder. A debenture has never been satisfactorily defined.

Lending money and securing loans

Abercorris Slate and Slab Co. Shareholders are members of the company and their rights have been described elsewhere in this book. Debenture-holders are creditors of the company and their rights are normally defined in the contract made between them and the company.

It is interesting to note that, unlike shares, debentures can be issued at a discount unless they are convertible into shares, when such an issue at a discount would be an invitation to evade the rule that shares may not be issued at a discount Mosly v.

The lender may wish to secure his position by taking a charge over the property of the company, that is, creating a legal relationship between himself and the company which will ensure he is paid in priority at least to some of the other claimants against the company.

In the circumstances in which a receiver may be appointed, he will be appointed to collect the assets of the company with a view to the repayment of the debt due to the debenture-holder.

He must, however, pay creditors whose claim should be paid before his, for example a preferential reditor under s. Goldblatt [] Ch Essentially a fixed charge gives the holder the right to have a particular asset sold in order to repay the loan that he has given the company.

This means that the company may not deal with the property subject to the fixed charge without the consent of the holder of the charge. A floating charge gives the holder the right to be paid in priority to others after the sale of the assets subject to the charge, but in this case the assets over which the charge floats are not specified.

The company may continue to deal with them without the permission of the holder of the charge and it is only on the happening of certain events such as non-payment of an instalment of interest or repayment of capital that the charge will become fixed.

It then becomes indistinguishable in form from a fixed charge. After the crystallisation, the company would not be able to sall these assets without the permission of the debenture-holder.

The court in Re Yorkshire Woolcombers Association Ltd [] 2 Ch see Casenote, page grappled with the definition of floating charges. In the Court of Appeal, Romer J said:Market-leading personal and commercial secured loans.

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ByStephen D. Simpson, CFA As mentioned before, banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on loans. A secured loan is money you borrow that is secured against an asset you own, usually your home.

The interest rates tend to be cheaper than with unsecured loans, but it can be a much riskier option so it’s important to understand how secured loans work and what could happen if . A loan that would help with college tuition or the purchase of a home could improve the borrower’s financial security.

Similarly, a loan could help a relative recovering from a financial setback. A hard money loan is also sometimes referred to as a private money loan. In simple terms, a hard money loan is a short-term loan solution that is obtained through real estate ventures.

These types of loans are funded through private investors which makes them unique from other loans. Loaning money to a family member or friend can cause strained relationships if you're careless.

Read these tips for lending to loved ones.

Secured Loan - Tech CU