- 20 Marks
PBL – OCT 2022 – L3 – Q6 – Alternative Securities for Construction Loans and Lender Remedies
Identify alternative security for a construction loan where traditional assets are unsuitable, and outline steps to perfect it; list key remedies under the Borrowers and Lenders Act 2020 for borrower default.
Question
(a) Your key customer BBA Construction Ltd. is engaged in a contract for the construction of a 200 kilometer road in the Central Region. He has completed over 60 % of the project and has certified works of GHC 800,000 to be paid. He is applying for working capital loan of GHC 500,000 to purchase materials for the project.
He has no security to offer save the assets of the company which comprise a one storey office building and the road construction equipment. Your managing director is not enthused about taking a fixed and floating charge over the assets of the company as they are subject to rapid wear and tear. The key person Mr. Aras also does not have any personal landed property to offer.
From the above, identify what alternative security may be available in the circumstances and how you would proceed to take the security to ensure that the bank’s interest is protected. [16 Marks]
(b) You have been asked to deliver a lecture on the remedies of a lender in the event of a borrower defaulting in the servicing of a facility. Mention the four key remedies provided under the Borrowers and Lenders Act (2020) Act 1052. [4 Marks]
[Total marks:20]
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