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When two or more lenders, usually banks, make a loan to a borrower together. The lenders enter into concurrent direct obligations with the borrower to make a loan, typically on a pro rata basis. The loan is coordinated by a lead lender that serves as an agent for all of the lenders in disbursing the funds, collecting payments of interest and principal, and administering and enforcing the loan. |
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A loan in which the original lender sells shares to other parties, called participants. Each participant acquires an undivided interest in the loan. |
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A letter outlining the terms and conditions on which the lender will lend. |
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Contains the lender's promise to lend a specified amount, describes the mechanics by which funds will be disbursed, the rate of interest to be charged, the manner of computing such interest, and the repayment terms. |
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an interest rate that fluctuates throughout the life of the loan according to the interest rate the lender would pay if it borrowed the funds in order to relend them. |
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The lowest published rate of interest at which the bank lends to its best and most creditworthy commercial customers. |
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the margin added to the theoretical cost that a bank incurs to obtain, for a given period of time, the funds it will lend. |
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London Interbank Offered Rate (LIBOR) |
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The interest rate based on the cost of borrowing offshore U.S. Dollars in the global interbank market, which today is centered in several locations in addition to London and is published in the business sections of all major daily newspapers. |
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certificate of deposit (CD) rate |
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An interest rate based on the average of the bid rates quoted to the bank by dealers in the secondary market for the purchase at face value of the bank's CDs in a given amount and for a given term. |
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A method of computing interest on a daily basis in which the nominal annual interest rate is divided by 360, and the resulting daily rate is then multiplied by the outstanding principal amount and the actual number of days in the payment period. |
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A method of computing the interest on the daily basis in which the nominal annual interest rate is divided by 365 and then multiplied by the outstanding principal amount and the actual number of days of the payment period. |
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A method of computing interest on a daily basis in which it is assumed that all months have thirty days, and thus the monthly interest amounts are always the same. |
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A line of credit that may be advanced and repaid from time to time at the borrower's discretion, subject to a final maturity date when all sums outstanding become due and payable. |
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A loan in which any advanced amounts may not be re-borrowed. The lender may require the entire loan to be repaid in one lump sum upon maturity, in which case the borrower only pays interest on the loan prior to maturity, or in equal or unequal installments of principal and interest. |
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A loan in which the amount lent is determined according to the levels of assets available from time to time as security for the loan. |
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In a loan agreement, conditions that must be met before the lender's obligations arise under the agreement. |
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Borrower's promises that it will or will not take specific actions as long as either a commitment of a loan is outstanding. |
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State the actions that a borrower will take, for example, maintain its corporate existence, pay taxes, maintain insurance, and comply with applicable laws. |
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State the actions that the borrower cannot take; for example the borrower cannot incur additional debt beyond a specified amount and cannot grant liens other than those specifically enumerated or arising in the ordinary course of business. |
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a claim on property that secures a debt owed by the owner of the property. |
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In a loan agreement, the list of events that will trigger the lender's right to terminate (or "call") the loan, accelerate the repayment obligations, and if the loan is secured, take possession of the property securing the loan. |
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Provides that any breach by the borrower under any other loan agreement constitutes an event of default. |
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When a lender relinquishes its right to call a loan based on a default. |
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When a lender decides not to exercise any of its remedies for the forbearance period. |
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short-term corporate indebtedness. |
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The specified date when a loan must be repaid. |
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the borrower can borrow the amount it requires up to a specified maximum and may re-borrow amounts it has repaid. |
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A fee that a lender requires as consideration for its promise to keep the commitment available since it receives no interest on amounts not borrowed. |
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A loan backed by collateral. |
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Take constructive or actual possession of collateral for a loan. |
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When a lender seeking remedies against real property security it may be restricted from suing the borrower personally. |
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Loans or other transactions secured by the borrower's collateral. |
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permits one party to automatically deduct amounts owed to it by the other party from the payments the first party makes to the second party. |
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Under Article 9 of the UCC, any interest in personal property or fixtures used as collateral to secure payment or the performance of an obligation. |
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Under Article 9 of the UCC, the person who owes payment of other performance of the obligation secured, whether or not that person owed or has rights in the collateral. |
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Under Article 9 of the UCC, the lender, seller, or other person in whose favor there is a security interest. |
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an agreement that creates or provides for a security interest. |
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When all the formal requirements to create an enforceable security interest have been met. |
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make a security interest valid as against other creditors of the debtor. |
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a security interest that is a possessory interest. |
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property that the debtor acquires after it signs the security agreement. |
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a security interest in the proceeds if the collateral is sold, exchanged, collected, or otherwise disposed of. |
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collateral for one loan may be used to secure obligations under another loan. |
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a clause in a security agreement that states that collateral for one loan my be used to secure obligations under another loan. |
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A form that is filed to perfect a security interest. |
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purchase money security interest |
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a security interest when the seller of consumer goods lends the buyer the money with which to buy them and is automatically perfected. |
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an undertaking by one person, the guarantor, to become liable for the obligation of another person, the primary debtor. |
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a guaranty in which specific nonpayment obligations will be performed. |
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the guarantor's obligation to pay the lender is triggered, immediately and automatically, when the primary debtor fails to make a payment when due. |
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the guarantor becomes obliged to pay only after the lender has attempted unsuccessfully to collect the amount due from the primary debtor. |
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the maximum amount of the guarantor's liability is expressly stated in the guaranty instrument. |
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a guarantee that is enforceable only with respect to a specified transaction or series of transactions. |
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A guaranty that covers all future obligations of the primary debtor to the lender. |
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subsidiaries guarantee, or pledge their assets as security for the parent's debt. |
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When the acquisition of a company is financed largely through debt. |
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an agreement whereby one or more creditors of a common debtor agree to defer payment of their claims until another creditor of the same debtor is fully paid. |
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Indebtedness that is subordinated under an agreement. |
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an agreement between two secured creditors whose respective security interests, liens, or mortgages attach to the same property and in which the subordinating party agrees that the lien of the other creditor will have priority notwithstanding the relative priorities that the parties' liens would otherwise have under applicable law. |
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A doctrine developed in bankruptcy law to prevent one creditor, through fraud or other wrongful conduct, from increasing its recovery at the expense of other creditors of the same debtor. |
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