By answering the following check your knowledge of the busin

By answering the following, check your knowledge of the business decisions involved in secured transactions: ty Assume that you are a retailer with a large amount of outstanding accounts receivable and you are in need of cash to pay expenses. How might you raise the necessary cash? Explain. Assume that you are considering lending to Fred Tauber of Tauber & Sons and taking a security interest in certain property of Tauber & Sons. What should you do prior to lending the money? Explain. Assume that you are arranging to finance another\'s business. It will be a secured financing plan that works on a continuing basis. What provisions should you require for inclusion in the security agreement and in the financing statement? Explain. a. ts b. c. Assume that you are a secured party and are in doubt about whether you have to file and, if so, where to file. What do you do? Explain. d.

Solution

a. In this case the retailer can consider ‘accounts receivable financing’ to raise the required cash. In accounts receivable financing agreement the retailer will use its receivables as collateral to borrow cash. The retailer can opt for any of the following methods to receive cash in this case – asset based lending, traditional factoring or selective receivable finance. In case of asset based lending the receivable company will commit majority of their receivables. In case of traditional factoring the retail company will sell its accounts receivable to a funder at a discount. In case of selective receivable finance the retail company will use only a select few accounts receivables for getting cash.