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Collateral
• collaterals are properties of value pledged to secure a loan. They may
be personal or real properties.
• This includes financial and other resources such as bank deposits,
inventories, recievables and other assets that the company can pledge
for loans.
Loans secured by movable personal properties are called chattel
mortgages.
Loans secured by fixed assets are called real estate mortgages.
Other collaterals that my be given are:
a. corporate securities such as stocks and bonds
b. signatures of co-makers and co-signers
c. goods in bonded warehouses represented by
warehouse receipt
d. hold outs on deposits
e. pledges on receivables
Condition
• refers to the environment in the customers industry,
economically, legally and politically in relation to growth.
• These are external factors over which the credit applicant
has little or no control but which may have significant
influence upon the appraisal of credit risk.
According to Chapin and Hassnet most business are subject
to two types of movement, namely:
A. The regular recurring seasonal activity
B. The regular oscillation of business as a whole