| There are infinite numbers of types of | | | | Oil and Gas reserves as estimated by |
| collateral as virtually anything can be used | | | | qualified engineering firms and at agreed |
| for such purpose as long as it is acceptable | | | | price assumptions and any discounts |
| to the lender. The nature of collateral | | | | applicable can be used as collateral for |
| acceptable for any loan would depend on the | | | | certain types of loans, especially long term |
| type of loan, structure, tenor, amount, etc. | | | | loans and project-tied loans. The borrower is |
| The following are some of the common types of | | | | assumed to be the owner or is in control of |
| types of collateral usually demanded and | | | | such natural resources. |
| accepted by commercial loan lenders. Real | | | | |
| Estate (Land and Building), Plant and | | | | 4. Marketable Securities |
| Machinery, Natural Resources (oil and gas | | | | |
| reserves), Marketable securities (Stocks and | | | | Stocks/Shares and Bonds of quoted blue-chip |
| bonds, Certificate ot Deposits, etc), Crops | | | | companies, certificates of deposits (CDS), |
| and Livestock, Inventory, Accounts | | | | treasury certificates and other similar |
| Receivable, etc. | | | | marketable securities, which can be readily |
| | | | converted to cash, may be used as collateral |
| 1. Real Estate | | | | for short term loans. The amount of loan |
| | | | extended would depend on the value of such |
| Land and Building represent one of the | | | | marketable securities with some margin or |
| commonest types of collateral in use | | | | discount to cushion any adverse fluctuations |
| especially for term loans and revolvers. | | | | on the market value of such securities. For |
| These can be houses, office building, | | | | the lender to adequately protect itself the |
| shopping centers, warehouses or factory | | | | borrower should duly execute all the |
| buildings. Real Estate will be ideal as | | | | necessary transfer forms though undated and, |
| collateral for medium to long-term loans. | | | | his signature under seal duly verified by the |
| | | | relevant registrars for share certificates |
| 2. Plant and Equipment | | | | used as collateral. These should be completed |
| | | | before the loan is disbursed to the borrower. |
| This refers to manufacturing plant and | | | | The essence is that if the loan goes bad for |
| machinery, trucks, generating set, drilling | | | | whatever reason, the lender will be in a good |
| rigs, presses, forklifts and similar items. | | | | position to realize on such securities |
| These are usually appropriate collateral for | | | | without recourse to the borrower. |
| term loans, revolvers, working capital loans, | | | | |
| syndications. It would be advisable to obtain | | | | 5. Inventory |
| a professional valuation of the plant and | | | | |
| machinery for use as collateral to enable the | | | | Inventory can be used as collateral in five |
| lender ascertain the appropriate amount of | | | | common ways as asset-based financing: |
| loan to sanction. | | | | Floating Lien, Trust Receipts (floor |
| | | | planning), Chattel Mortgage, Terminal |
| 3. Natural Reserves | | | | Warehouse and Field Warehouse Receipts,Bad |
| | | | Credit Personal Loan Source. |