AFM231 Chapter Notes - Chapter 26: Secured Creditor, Capital Expenditure, Standard Form Contract
13 Sep 2015
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Credit is a contractual relationship lender agreeing to lend money in exchange for promise by borrower to repay the loan. Secured credit: a debt where the creditor has an interest in the debtor"s property to secure payment. Bank has 2 main criteria in evaluating the loan application: focus on hometown"s financial health likelihood plans will succeed and able to repay loan within reasonable time period. Lender also considers economy, industry, personal guarantees, and state of credit markets. Events of default: failure by debtor to make required payments on a loan or to fulfill its other obligations under credit agreement. Trade credit is usually verbal and informal: if written would be standard form doc like a purchase order. Large debt financing loan agreement: same as negotiating a contract, if bank grants loan, will provide letter of commitment (a doc that is provided by lender to borrower and sets out terms of loan) terms like .
