Class notes
FL08 - Title Based Finance
- Course
- Institution
FL08 - Title Based Finance
[Show more]
Seller
Follow
hayes
Reviews received
Content preview
FL08 – Title Based Finance & Repo Financing 20/11/15Prof. Michael Shillig
TITLE BASED FINANCE AND REPO FINANCING
OVERVIEW
Title based finance vs security interest
The basics – retention of title
Receivables financing
Repo financing
TITLE BASED FINANCE VS SECURITY INTEREST
Distinction between title based finance and security interest goes back to
distinction between loan credit and sales credit
Loan credit = payment of money from creditor to debtor, subject to
repayment with interest
o E.g. term loans, debt securities
o Interest rate structure account for risk of default
Vehicle to generate profit for creditor
o Long term e.g. term loans, bonds, etc.
o High value in relation to overall value of debtor’s business
Sales credit = deferral of payment of sales price for particular assets
o Short term until creditor has paid for particular asset
o Low value with focus on particular assets, compared to overall value
of debtor’s business
o Interest rate is not important in generating profit for seller, because
profit is through sales price seller would rather be paid outright
instead of receiving interest
Interest rate not essential
Loan credit vs sales credit
o Secured in different ways
o Loan Credit Protection: Security interest proper
E.g. mortgages, fixed and floating charges
Strict formalities upon creation and enforcement
Registration requirements
Mandatory risk-and-reward structure equity of redemption
that debtor can always get property back by paying loan back
o Sales Credit Protection: Based on title (ownership)
No formalities other than transfer of ownership
No mandatory enforcement rules just seizing and dealing
with property
Risk-and-reward structure subject to party autonomy
No equity of redemption parties are free to deal with
any overvalue
Enormous flexibility lack of formalities upon creation
and upon enforcement
o Incentive to use title based finance to
traditionally secure sales credit, but also
sometimes loan credit
Problem of ostensible ownership no one can see this
interests in title, since no registration, etc.
o Title based funding as a cheaper alternative for loan credit?
Debtor selling asset to creditor at a discount and
repurchasing it
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller hayes. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.07. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now