NSW Company To Company Finance: No Asset Security

[Wattco]

Under commercial law, what is the best instrument to protect a financier who is to loan an amount of money (on a short term basis), with the intention of collecting a fee, but is not secured by assets?
* General security deed?
* Directors Guarantee, Indemnity?
* Assignment of Debt?

 

[Sarah J]

Hi Wattco,

Are you lending to a company, a partnership or an individual?

- A guarantee is always best if the guarantor has enough assets to cover any default;
- A floating charge can be placed on a company over a pool of (undetermined as yet) assets which crystallises upon default of payment;
- If you assign debt, you would be selling the debt including right to repayments but you would probably lose out on a little bit in order to make the purchase of this debt attractive to third parties.

Generally, a guarantor signing an undertaking that the debtor will meet all obligations and if not, the guarantor undertakes to bear liability, will be sufficient.

Have this in writing and signed by all necessary parties and dated.

 

[Wattco]

Thank you Sarah J,

Likely I would be lending to a company (but is also case/by case).

I have not set up my business structure as yet, but need to consider the best protection for my lending activities and protection of me also.

 

[Tim W]

I have not set up my business structure as yet, but need to consider the best protection for my lending activities and protection of me also.

Mezzanine Finance is not for the faint hearted.
Get yourself a lawyer, and have them get you set up properly.

You do know that you will need a Credit Licence from ASIC?

 

[Wattco]

Thanks Tim W.

Will go through business plan with a lawyer