FINANCING%20TECHNIQUES:%20SHORT%20TERM

1
FINANCING TECHNIQUESSHORT TERM
2
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

3
FINANCING TECHNIQUESSECURED 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

4
Secured Financing Under UCC

• C. Security Agreement
• 1. Conditionsmust be signed by debtor and
  describes property that collateralizes
• 2. Floating Lien
• floats forward in time on debtors 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

5
FINANCING TECHNIQUESTYPES 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

6
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

7
FINANCING TECHNIQUESTYPES 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

8
FINANCING TECHNIQUESBILLS 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

9
FINANCING TECHNIQUESWAREHOUSE 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

10
Warehouse Receipt Financing

• B. The Warehouse
• 1. Types
• a. Terminal
• b. Field usually in-house

11
Warehouse Receipt Financing

• 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

12
2 TYPES OF WAREHOUSES
TERMINAL WAREHOUSE
FIELD WAREHOUSE
Warehouse Mgmt. Company
Warehouse Receipt
13
FIELD WAREHOUSE
GENERAL WAREHOUSE
WAREHOUSE RECEIPTS
14
The Process of Warehouse Financing