Management and Organizational Studies 2275A/B Chapter Notes - Chapter 26: Unsecured Creditor, Secured Creditor, Trade Credit

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2275A/B
• Professor: Philip King

Document Summary

Unsecured credit: a debt where creditor has only a contractual right to be repaid. Credit is a contractual relationship all fundamental principles of contract law apply property to secure payment. If debtor defaults in repaying loan, creditor can seize property and sell it to pay debt. Secured credit: a debt where creditor has an interest in all or some of the debtor"s. Letter of credit: written promise by importer"s bank and given to exporter"s bank to make. If debtor fails to pay, creditor may sue, obtain judgment, then enforce judgment. If debtor has limited financial resource, creditor may not be paid. Trade credit is usually unsecured (i. e. credit terms of n30) payment to exporter when specified conditions are met. Lenders will look at the following three aspects of a business when issuing a loan: Events of default: failure by debtor to make required payments on a loan or to fulfill its other obligations under the credit agreement.