Typically, financial lending institutions such as banks prefer real estate as collateral. While fixed assets such as land or developed real estate are the preference, the bulk of capital stock of most investors consists of movable assets. Thus, moving forward in the 21st Century, movable collateral is an important tool for companies to gain access to finance and increase growth.
Lenders and other creditors must have the ability to rely on a filing system that protects their contract rights. Private market growth and development may not be realized otherwise. Because the value of movable collateral typically depreciates quickly, efficient enforcement procedures related to security interests are necessary to protect and properly determine property rights.
Financial institutions prefer to provide loans in return for immovable collateral, whether raw land, residential property or commercial property. Since deeds of title are formally registered, they may be presented as proof of ownership of any immovable property, thus leaving less room for doubt when determining the legality of the property’s liens and encumbrances. Of course, immovable property also makes it impossible for a debtor to abscond with the asset. It is primarily for these reasons that immovable property is more attractive than movable assets as security for a loan.
When creating a security interest, the process of defining the asset so that it satisfies legal requirements should not be complex. The procedure for perfecting a security interest must instill confidence that there are no superior claims to the asset. A compulsory filing with a publicly accessible registry of assets offered as collateral ensures that both of the aforementioned issues are not viable concerns.
A collateral registry is a tool of notification that tracks all security interests related to a property or borrower. A reliable collateral registry system reduces the risk that a borrower may utilize the same movable property as collateral to secure other loans without the lender’s knowledge. A movable collateral registry increases access to finance by allowing the leveraging of movable assets, such as inventory, equipment, and crops, into capital for future growth and investment.
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