Hypothecation Loans - Who Are Common Lenders?

[Bryan Hancock]

If one wishes to carry back paper on an asset they own free and clear and later pledge the loan receivables as collateral for a new loan who would they normally contact to loan this money? What sorts of terms are generally offered by these lenders and how do they price the money?

I have read that the hypothecation lender would be lending in an unsecured position as well. Is there any way that said lender could protect their position so that they aren't wiped out in a bankruptcy?

I am thinking that this scenario would be a good way to give lenders security for a line of credit without completely sapping the ROE if one wishes to take a passive role in the underlying asset instead of managing the project. Is there anything incorrect with this line of thinking?

[Scott Hubbard]

@Kevin and Brian

This discussion was preliminary and I too want to nail down some costs, credit limit, and a rate. I have a meeting scheduled this Friday and I bringing in my bank statements from another bank.

I am with one of the big five right now and you should have seen my business banker's face when I asked about getting a BLOC using my cash flow as collateral. After looking through her brochure's, she said they do not have that type of loan program.

I am done with big banks!