Tips For Account Receivable Pledged As Collateral

Accounts Receivable, commonly used to secure lines of credit, are normally presented as a list of trade customers or clients that owe trade debts to an entity indicating amounts owing and the number of days they have remained unpaid.

A line of credit is generally revolving credit secured by accounts payable and inventory that are monitored constantly. If collateral shortfall occurs, other fixed assets including real estate may be taken. The primary source of repayment is debt collected in the normal course of business. If one takes accounts receivable as collateral, one should mitigate the risk by excluding some of the accounts, such as intercompany accounts, from the list and examine the possibility of the following risks;

• An insincere borrower may collect receivables and fail to remit to the lender, thus causing the line of credit to eventually max up. Lockboxes or direct remittances to the lender may tone down this risk.

• An unscrupulous borrower may concoct accounts in order to obtain more funds. Periodic random sampling of debtors by the lender, ensuring that invoices are authentic and validating balances with debtors may help

• If the borrower has mutual contra accounts with its customer, there is the likelihood of offsets to take place without the lender's knowledge. Ensure to notify such customers of the existence of your assignment of the receivables.

• Some goods may be "sold" on consignment basis, that is, the goods are placed in the hand of another, but the consignor retains ownership until the goods are sold or returned. Such goods should be identify and the terms of consignment examined carefully because unsold goods may be returned to the consignor.

• At times a customer may make counterclaims or dispute amounts owing several weeks after the receivables aging list is compiled. Consider the frequency of such occurrences and discount the loan amount accordingly.

• Look out for hidden liens arising from suppliers and other sources as liens may dilute your collateral. For example, if the borrower has a tendency of not paying taxes, an IRS lien may disrupt operations and put your loan at risk.

• Look at the frequency of returned goods and your clients policy on returned goods because a dishonest borrower can resell returned goods and fail to inform the lender.

• A borrower may invoice for goods and continue to warehouse them until the customer needs them. If such goods become the subject of a dispute subsequently, the borrower may not succeed in collecting the receivable. Establish whether there are any previous such cases.

• Analyze the receivables periodically to determine whether or not the value is maintained. In order to value eligible receivables, take the total of book value of debtors aging up to 90 days less contras, disputed amounts, intercompany, consignments, and other risky items. Then discount this estimated value by say, 25% or more to provide a cushion for the unseen risks.

• In addition to taking accounts receivable as collateral, endeavor to strengthen collateral cover by taking inventory as well.

• Review financial statements regularly to identify any signs of deterioration in performance, i.e. sales turnover, gross revenue, net income and accounts payables.

Franc Jo is a Senior Underwriter at http://www.loansunderwriting.com, the leading provider of outsourced Commercial Credit/ Underwriting support to lenders and funding solutions to small businesses throughout USA. Find similar articles and tips on money matters at http://www.loansunderwriting.com/Pages/Articles.aspx

Easy Restaurant Funding

Restaurants just like any other kind of business need funding at some time. It could be money for advertising, expansion or for inventory. In most cases, only a loan can save a restaurant yet the process of getting the loan can be quite lengthy. When getting the loans from banking institutions, you also have no approval guarantee and there could be lots of hidden charges coming with the loan.
When faced with the need to fund your restaurant, a merchant cash advance could be the solution you have been looking for. This loan is not a bank loan and neither is it a credit line. It is more of an investment by the lender into your business to help you with your restaurant needs after which you get to repay in small and fixed percentages. The cash advance gives your restaurant the chance to grow and you will of course get to repay the cash from the growth.
The cash advance is quite helpful and the best thing is that you don't get any restrictions with regards to how you use the money. Your credit card transactions are what will make everything possible and you will have access to the cash in a few days time hence making it all possible to boost your restaurant thereby getting the best out of it. This kind of business loan is free from risks and it is the method most people are using today to improve their businesses.
When you choose to go for this loan for your restaurant funding needs, you will be in a position to get a huge amount of money in relation to the average credit card monthly volume. The payback periods are quite flexible and you can even pay the amount within a year. It is definitely an easy and fast way of funding your restaurant and increasing its growth as well as productivity.
When you are going for the funding, just like any other kind of funding you will need to ensure that you choose the right lender whose terms and conditions for the funding you are comfortable with. The reputation and experience of the lender should matter as it is what will tell you just how reliable and trustworthy the funding is. There are so many fraudsters out there today hence the need to ensure that you are choosing the right people with the potential to help your restaurant grow and do better.

If you want to avoid a lengthy loan process with hidden fees and no guarantee of approval, use simple and straight-forward process for Business Loans and Restaurant Funding. You can avoid all type of Bad credit business loans.

Various Types of Promissory Notes

Promissory notes are used as a document to record the details of the loan transactions between two or more individuals. The documentation promises that the money borrowed will be paid back to the lender within a specified time. These can be created at any time of the loan for ensuring the secure payments. Any kind of loans must be documented using this note, no matter whether the loan is a simple payment to be made for a family member or a friend. The note has legal validity by which the borrower is legally tied to keep the promise of payment as per the agreements in the note.

A well written document should contain the repayment terms, repayment amount and interest charged, maturity date and in case of non-payment what action should be taken. This documentation is considered as a good idea for record-keeping and payment of tax for loans taken between individuals. Once this document is signed by both the borrower and lender, the borrower is agreeing to the terms and conditions written in the document. The borrower should pay back the amount within the timescale showed in the note or else the lender can take legal action against the debtor. Based on the loan type, there are various types of promissory notes.

1. Commercial

This kind of note is documented according to the terms agreed by the lender and the debtor. In this case, the lender can legally take action against the debtor by acquiring the assets of the borrower as mentioned in the document, if the debtor cannot repay his/her loan. The lender can demand for immediate full payment after the maturity date and don't have to wait for long to obtain the money as installments from the person. Commercial promissory note includes strict conditions and some additional legal conditions.

2. Personal

In most of the cases, there will be only verbal agreement between family members or friends when you borrow money from them. But verbal agreement does not have legal approval in courts as you don't have any proof on the loan borrowed from you. A personal promissory note will provide good faith on the borrower and a security to the lender. You will get these notes from supply stores or can be downloaded. You should include the amount borrowed, terms and conditions for repayment, interest rate and what action to be taken if the money is not repaid.

3. Real Estate

This type of note will secure the loan borrowed by the debtor, but if she/he fails to do so, the lender has to pay the loan. So lender must include a mortgage for the loan given to the borrower which provides security to the lender when the borrower does not repay the loan.

4. Investment

These notes are used in businesses where the investors are the taking the risk of losing money. So the investment promissory note is making the borrower to repay the loan disregarding the success of the company. In this case, the note is functioning as a currency with legal value which can also be traded.

More information, please visit free promissory note form and promissorynoteform.org [http://www.promissorynoteform.org/].

Facts and Findings of Business Loans

Business loans can be the lifeline of any kind of business from small shops to large showrooms and home based manufacturing companies to large manufacturing companies can need extra cash to keep business operations moving. Normally loans for business purposes are provided by banks. Banks tend to offer loans to those who can meet their strict criterion which is basically an assessment of applicants' loan returning capacity. The banks review the applicants past records, credit history, current assets and liabilities to determine the likelihood of repayment before approving the loan amount. The bank offers a fixed loan amount irrespective of what actually maybe needed because it relies on its findings rather than the necessary commitments the funds were applied for to meet.

Business loans are also offered by various financial institutions. Numerous financial companies provide cash in hand against the businesses gross monthly sales. These institutions are also guided by a set of requirements but they are less stringent than those of the banks. Small businesses that find it difficult to get approved for money from the banks can approach these financial institutions and receive a loan with a good sum of money. These companies can tweak their rules to favor their customers because they are more aggressive in distributing loans than banks usually are. This is most likely the reason why financial institutions are preferred by businesspeople for obtaining business loans.

A quick survey of the process for obtaining business loans from financial companies as well as from the banks can reveal why people rely on them for money. The financial companies employ a user friendly loan process; however, the banks follow a cumbersome procedure which not every businessperson can understand or follow.

The time it takes for processing and approving a loan is very crucial and financial institution score high marks in this criterion. Banks may take any number of days or weeks to give a decision on approving a loan but private companies assert that they can provide loans in as little as hours. The conditions set forth by private companies are easier to meet and are reasonable while banks sometime make tough demands which many businesses can't meet.

The interest charged on the amount of the loan by private institutions and banks are similar.

These are some of the reasons why businesses are choosing companies that are providing private business loans over bank loans. Business loans are a necessity and business owners are less concerned about who is providing them the loan. They will approach the financing institution which provides them with a quick loan at reasonable interest rate. Financial institutions check the current economic health of the business before approving the loan. If the business is doing well then they find no reason to deny the quick loan.

Robert Ellenbecker has been associated with the banking industry for a long time and today he is an authority on micro finance. His articles on business loans, cash advances and credit card processing are informative and make a good read. For more information visit Business loans.