IMPROVING COLLATERAL ARRANGEMENTS IN LENDING TO SMALL ENTERPRISES

Abstract

This article examines the selection, valuation, and monitoring of collateral in lending to small businesses. Drawing on legislation governing the collateral registry, international practice in the use of movable assets, and principles of partial credit guarantees, it proposes an approach that combines legal and economic due diligence. The analysis distinguishes between the market value of collateral and its discounted net recovery value and provides an illustrative calculation. The use of movable assets and receivables as collateral is constrained by the quality of documentation and the applicable legal framework. The recommendations presented are conceptual and do not constitute empirical findings based on actual bank collateral portfolios.