Security Flashcards
Risk Capital is….
Funds allocated to a speculative activity
Good Security x4
Easy to take
Easy to value
Easy to realise
Increasing or stable value
3 characteristics of a customer we’d lend to without security
- Good Cash Generation
- Strong Capital Base
- Proven track record
Difference between freehold and leasehold
Freehold - owner has a legal interest
Leasehold - owner has a legal interest for so many years
What applies when a loan is secured against a personal residence
MCOB
Calculating a second charge x4
-Prime charger gives consent
-Secondary advance given to client
-Deduct outstanding amount of first charge from second
-What remains is the security.
Clauses in Bank Charge form 3x
All Monies
- covers all borrowing
Continuing Secuirity
- all borrowing at time of charge and after
Subsequent Charge
- holder of Charge provides notice to crystallise and recover funds
- deed of priority to confirm rank
Personal Gurentees x3
-Easy to take/hard to realise
-Lenders seek guarantee and indemnity (not liable after-the-fact)
- consider intention and resource
Personal Gaurentee Requirements x4
SLP requires
- Independent Legal Advice
- Access to Regual Financial Info
- Details of Balances
- Ensure not an unlimited gaurentee
Debenture
Provides fixed and floating charges
Provides all encompassing powers of assets
Floating Charge
Legal ownership of assets transfers to lender if crystallised
Subject to hardening period
- lender challenged by administrators
- prevents rank above other creditors
How are unsecured creditors protected
- Prescribed part - ringfences
-50% up to 10k - 20% up to 800k
Value of a debture
Fluctuates until crystallisation
Only net debt can be claimed by creditors
Stock - romalpa clause. Gives stock seller (creditor) rights until paid in full
Stock value is subjective - oftern 10%
