One Thing Lenders Sometimes Require When Lending Money to a Small

question 194

Essay

One thing lenders sometimes require when lending money to a small corporation is an assignment
of the common stock as collateral on the loan. Then, if the business fails to repay its loan, the
ownership of the stock certificates can be transferred directly to the lender. Why might a lender
want such an assignment? What advantage of the corporate form of organization comes into play
here?

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Definitions:

Protein-Covered Fat Droplet

Structures found in cells, notably in milk, where fat droplets are enclosed by a membrane of proteins, aiding in fat digestion and nutrient absorption.

Hepatic Portal System

The portion of the circulatory system that carries blood from the intestine through the liver.

Blood Circulation

The continuous movement of blood through the heart and blood vessels, which delivers nutrients and oxygen to all cells and carries away waste products.

Nucleic Acids

Complex organic substances that constitute the genetic material of living cells, including DNA and RNA.