FINANCING TECHNIQUES: SHORT TERM

UNSECURED CREDIT I. UNSECURED CREDIT A. How is it provided? line of credit promissory note that can be rolled over B. Purpose: usually not specifically stated “general corporate purposes” “working capital” Used when foreign sources of supply is significant

FINANCING TECHNIQUES: SECURED FINANCING II. SECURED FINANCING UNDER UCC A. Purpose of Article 9 of the UCC: to reduce legal uncertainties of commercial law in the U.S. and deals specifically with secured transactions. B.Key to Article 9: (applies to state laws only) goods collateralize the loan

Secured Financing Under UCC C. Security Agreement 1. Conditions: must be signed by debtor and describes property that collateralizes 2. Floating Lien “floats” forward in time on debtor’s future goods acquired 3. Plaster Lien applies to current and future assets of the debtor 4. Proceeds when assets are sold, interest provided in the proceeds of the sale

FINANCING TECHNIQUES: TYPES OF SECURITY D. PERFECTION OF SECURITY INTEREST 1. What is meant by perfected? a. properly signed security agreement between creditor and debtor b. creditor has given a loan to debtor c. debtor has ownership of assignable rights to the collateral

PERFECTION OF A SECURITY INTEREST 2. Types of Collateral a. Possessory when secured party has physical possession, e.g. bank has the negotiable bill of lading or warehouse receipt b. Nonpossessory: requires filing with appropriate state authority to give public notice of the interest in the collateral

FINANCING TECHNIQUES: TYPES OF COLLATERAL E. SPECIFIC COLLATERAL 1. UCC Classification of Collateral a. Tangibles: physical assets b. Intangibles: accounts receivable, contract rights c. Semitangibles: promissory notes, stocks, bonds

FINANCING TECHNIQUES: BILLS OF LADING III. BILL OF LADING AS A TITLE DOCUMENT A. Usual Procedure: a bill of lading that assigns title to holder B. Possible Sale of Collateral: when draft is dishonored, bank may have an interest and sell the goods in the open market

FINANCING TECHNIQUES: WAREHOUSE RECEIPTS IV. WAREHOUSE RECEIPT FINANCING A. Uses: exporter wants inventory stored in a warehouse to be used as collateral for a loan Requires a warehouse receipt

Warehouse Receipt Financing B. The Warehouse 1. Types a. Terminal b. Field: usually in-house

Warehouse Receipt Financing 2.Two types of receipts a. Negotiable made out to the order of a named bearer and may serve as possessory collateral b. Nonnegotiable does not convey title or may be used as possessory collateral 3. Financing Procedures 4. Protection of Lender

TERMINAL WAREHOUSE FIELD WAREHOUSE 2 TYPES OF WAREHOUSES Warehouse Mgmt. Company Warehouse Receipt

FIELD WAREHOUSE GENERAL WAREHOUSE WAREHOUSE RECEIPTS

The Process of Warehouse Financing