Why Do Lenders Require Collateral?
Getting an unsecured business loan is nearly impossible these days unless you are tremendously wealthy, a multi-national organization or don’t really need the money. The one exception would be a government bailout. Thus, collateral does matters.
However, banks and other lenders do not really want your collateral - they are not in the collateral business - they are in the money business. It is too costly for them to take ownership of such collateral should your business default on payments. Traditional lenders even have to fund allowance for loan loss accounts when the loan is funded and write down the assets value on their books (not market value) when a loan comes past due - all to reduce their losses against faulty borrowers.
Since this seems so painful for lenders, why do… Continue reading
Tags: financial institutions, irs, repayment, trad
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