The Uniqueness of Short-Term Collateralization

Klapper, Leora

World Bank, Washington, DC

关键词: SECURED TRANSACTIONS;    COLLATERAL;    ASSETS;    ACCOUNTS RECEIVABLE;    BORROWING ARRANGEMENTS;   

DOI  :  10.1596/1813-9450-2544
RP-ID  :  WPS2544

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The author finds evidence that lines ofcredit secured by accounts receivable are associated withbusiness borrowers with a high risk of default. While anunsecured short-term loan is repaid from the borrower'sfuture cash flow, a loan secured by accounts receivable (aunique form of "inside" collateral) is repaid frompreviously generated and observed sales (the borrower'strade credit terms to its customers). Consequently, lendersthat secure accounts receivable are most concerned with thecredit risk of the borrower's customers and theborrower's ability to continue to generate new sales. Astylized theoretical model demonstrates that the value of asecured line-of-credit loan in minimizing contracting costsis associated with the borrower's business risk and thequality of the borrower's customers. Empirical tests ona sample of publicly traded U.S. manufacturing firms findthat firms with secured line of credit loans are observablyriskier and have fewer expected growth opportunities. Theauthor's findings suggest that observably riskierborrowers can borrow more on a secured than on an unsecuredbasis. The results highlight the important role of securedletters of credit in providing liquidity to risky,credit-constrained firms that might not have access toexternal financing through other channels.