Commercial Secured Loan – The Traditional Bank Loan
The traditional secured bank loan is the bedrock of commercial financing and debt.
The bank lends money collateralized by assets which, presumably, if liquidated would cover the value of the note; thus the bank is secured, and even in default the bank will get its fair value through repossession liquidation or foreclosure liquidation.
The challenge and opportunity happen when the asset is worth LESS than the debt, thus leaving the bank partially unsecured. This is where opportunity exists and where much of our strategy works so well.
When a loan is written with inadequate collateral, collateral which in its current condition is worth less than the loan, there is room to negotiate.
This gives us the opportunity to buy out the assets from the bank for the current value and settle the portion of the loan that is not covered by this amount. This frequently provides very significant discounts and releases the guarantors of their personal obligation.
There are many permutations of this strategy, but the basic concept is as stated – secure the business assets based on their current value and then settle any remaining personal guarantees.