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What Constitutes Consideration-Lend to Entity

What constitutes consideration when lending to an entity, if a co-borrower is not a part of the entity and receives no proceeds or use of the funds?

Answer by Dan Persfull: Consideration is a State law issue.


Answer by Kathleen Blanchard: The bank should discuss consideration with legal counsel. it is purely a legal issue and extremely important when it comes to collecting from co-borrowers or guarantors. Owners of businesses have a vested interest in the success of the business; close relatives may be viewed as having a close enough interest in the success of the business owned by their relative.

Similar relationships are found from individual to individual.The same can be true of parent entities but may be stretched by upstream relationships to parents or affiliates.

As you can see, this is a complex topic and consultation with legal counsel when establishing the loan and relationships is key.

First published on 5/27/13

First published on 05/27/2013

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