Business Law Notes

PROTECTING BUSINESS PROFITS – THE HOLDING COMPANY AS “BANKER”

Entrepreneurs and owner/managers have large financial investments in their operating businesses. Instead of leaving them exposed to business risks, they should take a page out of the bank’s playbook by setting up their investment (including the investment represented by retained earnings) as secured loans, much like the bank requires security for its loans. This short article describes a simple, but effective, way of doing so with a holding company.

SAYING "NO" TO PERSONAL GUARANTEES BY SPOUSES

As we know, banks routinely ask for guarantees from the spouse of a business owner and entrepreneur.  However, it is a mistake to assume that the spouse’s guarantee it is always a “deal breaker” for the bank.  (It wants as much security as possible, and how is it to know that a guarantee will be refused unless it asks.)

This article contains some pointers about how to say “no” to the bank’s request for the guarantee from a spouse to improve the likelihood of escaping the requirement.

THE LENDER'S USE AND DISCLOSURE OF BORROWER'S (AND GUARANTOR’S) PERSONAL INFORMATION

Banks, lessors, mortgage companies and other lenders routinely collect personal information about borrowers and guarantors when underwriting credits, and frequently have a need to later disclose this personal information to receivers, bankruptcy trustees, monitors and others in debt restructuring transactions.