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02-03-2016, 04:57 PM #1
Breach of contract is very vague though. I can add a clause that says if you sleep passed 11am after I give you my money you are in default. They breach the contract right? But it would not hold up anywhere. Just saying there's a very grey area in this industry. If it was that clear cut, 1st position funders would go after everyone behind them and half this industry would crumble.
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02-03-2016, 04:58 PM #2John Celifarco
Managing Partner
Horizon Funding Group
3423 Ave S
Brooklyn, NY 11234
T: (347) 773-3990 | F: (718) 795-1990
Linkedin: Profile
Email: john@horizonfundinggroup.com
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02-03-2016, 05:00 PM #3
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02-03-2016, 05:05 PM #4John Celifarco
Managing Partner
Horizon Funding Group
3423 Ave S
Brooklyn, NY 11234
T: (347) 773-3990 | F: (718) 795-1990
Linkedin: Profile
Email: john@horizonfundinggroup.com
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02-03-2016, 07:47 PM #5
Reputation points: 16720
- Join Date
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In my contracts, the language grants us a security interest in the "collateral". (Perfecting that interest is another topic) That is, all business assets: accounts, receivables, etc., as defined by UCC Article 9. The contract further goes on to state that if said collateral is pledged/mortgaged/conveyed/encumbered, other than in the normal course of business, or if any collateral is sold at a discount (e.g. sale of future receivables, like an MCA), those proceeds must be remitted to the lender otherwise the loan is in default. It is generally referred to as a "due on sale or encumbrance" clause and it is in every contract for extension of credit that I've seen or issued, even bank debts. Lenders use this clause because they are UW the borrower at point X, based on cash flow and other credit data available at the time, including knowledge of all outstanding debts up to X time. After X, if a borrower takes additional debt the lender that UW the deal at time X can't be as confident that the borrower still has the capacity to repay given all the variables and unknowns, like amount, term, rate, etc. of the new debt or the financial condition of the borrower at the time it was taken. This can be interpreted as a "material adverse change", and is also a common act of default in credit contracts.
There is a massive amount of case law around both the "due on sale or encumbrance" and "material adverse change" clauses and lender's right and remedies when invoking them to make demand for payment given how prevalent they are in loan contracts. There is nothing at all vague about it, except to people with no understanding of contract law and legal precedent in this area. Then there is the aforementioned tortious interference. Also, fraudulent constructive conveyance/transfer should the transaction lead to insolvency of the debtor. You do NOT want to be party to a charge of fraudulent constructive conveyance, more so if the charge is being levied by a trustee in a BK proceeding. That's when receivership and injunctions happen. Fun times.
Everyone here trying to play cute with stacking by sticking their fingers in their ears, or heads in the sand, is going to have a bad time when the big boys all say enough is enough and start really cracking skulls in court.
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02-04-2016, 08:27 AM #6John Celifarco
Managing Partner
Horizon Funding Group
3423 Ave S
Brooklyn, NY 11234
T: (347) 773-3990 | F: (718) 795-1990
Linkedin: Profile
Email: john@horizonfundinggroup.com
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