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Welcome
to AFRICABIZ, 
Welcome
to AFRICABIZ HTML Email edition.Previous issue available at this
link
Dear faithful reader,
THE
PROBLEM OF COLLATERAL'S ENHANCEMENT TO SECURING A LOAN
In previous delivery "How
Financing Research Brokerage Works" we stated the following concerning the
security or callateral offered by a Borrower to securing a loan:
"Because,
everything said, the final guarantee to Loan Closing / success boils down to the
kind of Security, Collateral or Bank Guarantee offered.
The Security
offered could be backed and or enhanced by a Financial
Indemnity Bond to increase the chance of Loan Success."
Indeed,
there is no doubt the quality of the collateral offered by a borrower increases
his chance to securing the loan. A good Busineess Plan and the best Management
Team in the world are not enough to convincing lenders to invest in your project.
Positive Cash Flows over loan duration, which are indication that the project
is bankable and will pay back interests and principal need to be supported by
a good Collataral or Security.
WHAT IS A SECURITY
/ COLLATERAL?
A Search of the word Collateral in GuruNet
gives the following definitions:
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1- A Collateral is a Property acceptable as security for a loan or other obligation.
2- In other words, a Security or Collateral is a Financial Instrument
issued by a Borrower to a Lender.
3- Or again: Property or assets that
are offered to secure a loan or other credit.
4- Property or its equivalent
that a debtor deposits with a creditor to guarantee repayment of
a debt.
5- And on the legal ground: Property pledged by a borrower
to protect the interests of the lender in the event of the borrower's default.
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Collateral becomes subject to seizure on default. Acceptable collateral includes
any or combination of the following:
1-
Cash Deposit.
2- Bank Guarantee
3- Letter of Credit
4- Certified Deposit.
5-
Promissory Note
6- Current Gold Certificate (GLD, GBC)
7-
Bank Draft.
8- Cashier Check.
9- Government
Bond
10- Treasury Bill.
11- Insurance
Guarantee
12- Surety
Bond
13- North American / Western European Real Estate.
14-
Blue or Red Chip Stocks/Shares.
15- Precious Metal / Gemstones (with
appraisal or valuation). |
HOW GOOD IS A SECURITY?
A bank or
a state endorsed guarantee are the best guarantees accepted by lenders.
Collateral(s)
provided by borrower must have a tangible, bankable value. The issuing Bank
must be a top bank, a country's CENTRAL BANK, or an AA or AAA rated insurance
company. Minimum face value of instrument is US$15
Million.
THE
PROBLEM OF A THIRD PARTY GUARANTEE
You will never (if ever!) lend money to your best friend without
the guarantee that he will pay you back. Right? So does the lender to a borrower.
Furthermore, financing sources / lenders prefer to have multiple
guarantees instead of a single one. That is why a borrower is always confronted
with the problem of Security or Collateral's enhancement.
To have
a guarantee acceptable by lenders, borrowers often negotiate Security or Collateral's
enhancement with a third party prior to first-contact
meeting with lenders.
It has been Dr. Quenum & Associates / Dynamic
Group, LTD's experience that third party's arrangements often do not work. Most
of the times Third Party Guarantors issue a document called Corporate
Guarantee, which is not accepted by lenders.
If the economic
analysis of your business shows positive cash flows backed by sound assets (equipment,
properties, cash in bank), your project stands on its own as a bankable project.
A third party guarantor will request that you pledge your assets.
Unless the collateral he then provides (to enhancing the Security backing your
loan request with the lenders) reads as follows: US treasuries, cash, or an AAA
rated bank instrument, the lenders will not be keen to accept said collateral.
Particularly if it is the so called Corporate Guarantee.
If after
the preliminary assessment of your project, based on the Executive
Summary and supportive documents, Dr. Quenum & Associates / Dynamic Group,
LTD found out that your assets are good, they advise you not to take up the collateral's
enhancement problem to a third party.
What is really needed for a
borrower to making the meeting-contact
with Dr. Quenum & Associates / Dynamic Group, LTD's financing source a
success leading to Loan Closing reads as follows:
| 1-
To prepare for adequate answers to questions put forward by lenders, which
specimens are here
exposed.
2- In case of the purchase of existing business, to negotiate
solid acquisition agreements with respective owners of targeted businesses.
3- In case of an expansion drive of an existing business, to
secure pro-format purchasing contracts with potential buyers of your production.
4- To draft a comprehensive Business Plan integrating
the whole scheme of your business and highlighting the resulting cash flows -
separately and globally. |
The procedure listed above is more efficient to wining the backing of the Lenders.
During the first-contact meeting
with the lenders, if necessary, Security and Collateral's enhancement are
discussed and suggestions made by the lenders. That is better for the borrower
than pledging its assets with, and paying large fees and commissions to a Third
Party Guarantor prior to meeting the lenders.
As every lender Dr. Quenum
& Associates / Dynamic Group, LTD's financing partners prefer to be in
the position of First Mortgage instead of coming
second to a third party guarantor. Which is normal and make more sense. The Third
Guarantor got paid for fees and commissions, but is not really taking the risk
of lending you the money!
Click here
for Time Is Money. Right? And here
for BusinessAfrica™ / Dr. Quenum & Associates / Dynamic Group, LTD do not
provide Bank Guarantee. However they can, as above explained, assist you for
the enhancement of Collateral offered to securing a loan.
"CONTRIBUTOR'S
GUIDELINES" are
available here. We invite you
to contribute to AFRICABIZ ONLINE MONTHLY ISSUE - with articles related to
"How Africa Could Bridge The Developing Gap".
Many
thanks for subscribing to Africabiz. See you on July 15, 2003.
Dr. B.M. Quenum
Click here for contact & support console
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| Business
Opportunities
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RIGHT FROM YOUR KITCHEN TABLE
There is in the trade equipement size-up for just 2 liters for the boiling
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show on the image below.
Click here for instructions on how to proceed. For useful instructions
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Adobe
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For
more details on the international trade of Essential Oils visit following link
Control Your Desktop
HOW
TO "ALMOST" GET RID OF PINK SCREEN
Ever got pink screen? Have you experienced your screen turning suddenly pinkish?
No? Ok . You are the lucky one for the time being.
However do not
think that you will never get into that annoying experience of looking at a sreen
that suddenly turned pink. There are thousand of people who reported the phenomenon
in discussions' forums.
But no one is capable, posting this delivery,
to give the proper and last word about it. Some think that the Monitor is to
be blamed (Power cord not welll fixed); other that the Graphic card is the responsible
device. There are even some who believe that a magnetic field (Speakerss) near
the computer may be the culprit.
In addition to the remarkable instructions
available in many webpages and support forums to solving the problem, here
is AFRICABIZ Online' contribution (Under Windows 98):
1-
Click on START and choose CONTROL PANEL.
2- Choose and
click DISPLAY.
3- Choose SETTINGS on the Display's Interface
and then ADVANCED.
4- On the Advance's Interface choose COLOR
MANAGEMENT's tab.
5- On the Color Management's Interface click
on ADD. You will see a listing of Color Profiles.
6-
Choose the one most appropriate with the trade mark of your Monitor and or Graphics
Card. You may choose several Color Profile and make one the Default setting.
| Once
you perform the configuration' steps above outlined the pink screen occurrence
may become less frequent. Once a while instead of daily! And when it does occur,
it lasts only few minutes instead of hours.
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