Property (TCT) as collateral of customers

**wowiesy** · September 7th, 2012 01:35 AM

Originally Posted by boybi

Yes, I'll be the creditor/supplier. Lumalaki na kasi purchases ng ilang customers and nakakatakot na. I'm thinking of requiring them to give collaterals para mataasan ko sa credit limit nila.

We are in FMCG manufacturing and distribution nationwide.. sa ibang regular customers - maliliit lang - mahirap yung collateral.. dinadaan lang sa terms talaga.. shorter terms... at most 1 up 1 down.. minsan mga supermarkets mahahaba magbayad (but mostly malaki naman chance na magbabayad.. pahirapan ka nga lang)...

sa mga distributors.. yan.. since business partnership... collateral... usually accompanied by Distributorship Agreement... then may Promissory Note (PN).. from the PN, either may Chattel Mortgage (truck / vehicle) or Real Estate Mortgage (lupa)..

pag Chattel.. we just appraise the value of the truck.. then get copy of OR/CR... execute a Chattel Mortgage (may bayarin to aside from notaryo - BIR for docs stamps) then RD para mapa rehistro yung mortgage.. lalabas yung ENCUMBERED na CR... this will be a notice to anyone / everyone that that vehicle is encumbered...

pag lote... appraisal din.. check the actual area... get copy of tax declaration sa munisipyo.. check kung updated ang bayad sa amelyar... pag ok.. execute REM... daan din ng BIR for docs stamps.. then RD... lalabas may annotation sa title na may REM na...

once na tapos na negosyo with the customer (either fully paid, o babatakin mo na since di na makabayad).. dun papasok deed of sale, unless you go through foreclosure proceedings (pag ayaw mag execute ng deed of sale yung di makabayad)...

**ab_initio** · September 7th, 2012 01:38 AM

It's a sale transaction --but some are using this transaction to secure long term debts. Like, a debt is to be paid within five years. After the lapse of 5 years, the debtor defaults, then the creditor doesn't need to go through the rigors of foreclosure. Although the Supreme Court, in a catena of cases, frowns on this and consider the same as mortgage. In pacto de retro sale, the pdr buyer may posses the property in case of default. In mortgage, the mortgagee cannot, otherwise the automatic appropriation of the security would be considered as pactum commissorium. Not legally possible. But if you are lucky, pacto de retro is easier to do.

**ab_initio** · September 7th, 2012 01:42 AM

With mortgage, you have to go through foreclosure proceedings because automatic appropriation is not allowed. This is what we call in law as pactum commissorium. No short cut. This is why I say PDR is easier.

**mark_t** · September 7th, 2012 01:47 AM

Originally Posted by boybi

Yes, I'll be the creditor/supplier. Lumalaki na kasi purchases ng ilang customers and nakakatakot na. I'm thinking of requiring them to give collaterals para mataasan ko sa credit limit nila.

Why not have your customers BONDED instead?

TCT as colateral is also a risk. Pera ang Kailangan ninyo para sa kalakal na binenta, hindi lupa.

Your client can unload a non performing asset to you. When what you need is cash flow.

Will you take that risk?

**wowiesy** · September 7th, 2012 01:52 AM

Originally Posted by ab_initio

It's a sale transaction --but some are using this transaction to secure long term debts. Like, a debt is to be paid within five years. After the lapse of 5 years, the debtor defaults, then the creditor doesn't need to go through the rigors of foreclosure. Although the Supreme Court, in a catena of cases, frowns on this and consider the same as mortgage. In pacto de retro sale, the pdr buyer may posses the property in case of default. In mortgage, the mortgagee cannot, otherwise the automatic appropriation of the security would be considered as pactum commissorium. Not legally possible. But if you are lucky, pacto de retro is easier to do.

hmm.. interesting... okay to ah... will have our legal check on this.. bakit di nya to inadvise dati pa hmm...

will PM you also =)

**wowiesy** · September 7th, 2012 01:53 AM

Originally Posted by mark_t

Why not have your customers BONDED instead?

TCT as colateral is also a risk. Pera ang Kailangan ninyo para sa kalakal na binenta, hindi lupa.

Your client can unload a non performing asset to you. When what you need is cash flow.

sa BOND naman.. you have to make sure the bonding company is legit. at di tatakbo if you have to claim na...

some, require bank guarantee or standby LC.. bank na bahala mag habol.. bank na nag require ng collateral... the bank guarantees the AR ng negosyo...

**mark_t** · September 7th, 2012 02:09 AM

Originally Posted by wowiesy

sa BOND naman.. you have to make sure the bonding company is legit. at di tatakbo if you have to claim na...guarantees the AR ng negosyo...

Syiempre ikaw ang pipili ng Surety.

Your client will be required to say ... deposit their land titles,jewelries, OR/CR etc

Surety issues the Bond.

Your client defaults.

You collect cash. And not be stuck with a land title that you will still have to liquidate.

If they are bonded for lets say 5 million. Then it is very clear this is his credit limit for the year.

**ab_initio** · September 7th, 2012 02:10 AM

The drawback with bond, you need to go to court in order to get paid when the surety does not pay. circuitous. As always, in business transaction the element of trust is important. Kung sobra ka namang sigurista, wala kang ma close na deal. hehehe. hence, while not telling your customers that: I DON'T TRUST YOUR UGLY FACE, you still need a little security. Most often, mortgagors do not want to part with their lands for sentimental reasons. :smiley: hence, most often too, they are interested in satisfying their obligation. win-win. Although, while it may need a lot of money to fuel the business, i would look at the collaterals as a way of diversifying my business activity.

**mark_t** · September 7th, 2012 02:42 AM

[QUOTE=ab_initio;2002425]The drawback with bond, you need to go to court in order to get paid when the surety does not pay. circuitous. As always, in business transaction the element of trust is important. Kung sobra ka namang sigurista, wala kang ma close na deal. hehehe. hence, while not telling your customers that: I DON'T TRUST YOUR UGLY FACE, you still need a little security. Most often, mortgagors do not want to part with their lands for sentimental reasons. :smiley: hence, most often too, they are interested in satisfying their obligation. win-win. Although, while it may need a lot of money to fuel the business, i would look at the collaterals as a way of diversifying my business activity.[/QUOTE

So you go to court to garnish the surety's bank account.

Would it not be easier to collect from the surety than from your client with a cash flow problem?

What then is the better alternative... trust that they will redeem?

How do we go forward? If we are not interested in land?

**vinj** · September 7th, 2012 09:37 AM

Boybi, how about a Stand-by LC instead? If your customers have credit lines with the bank, you can ask them to issue a Stand-by Letter of Credit in your favor, which you can call on in event of payment default. It doesn't have to cover the entire amount of your dealings with them. Even just a percentage can do so at least may panghahawakan ka.

Companies like San Miguel also require collateral from their distributors. Usually it's through a Real Estate Mortgage or Stand-by LC.