Question

_____ provides a lender recourse to all the personal assets of the entrepreneur
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Answer 1

Mr. Anil Singh has been running a restaurant for the last two years. The excellent

quality of food has made the restaurant popular in no time. Motivated by the

success of his business, Mr. Singh is now contemplating the idea of opening a

chain of similar restaurants at different places. However, the money available

with him from his personal sources is not sufficient to meet the expansion

requirements of his business. His father told him that he can enter into a

partnership with the owner of another restaurant, who will bring in more funds

but it would also require sharing of profits and control of business. He is also

thinking of getting a bank loan. He is worried and confused, as he has no idea

as to how and from where he should obtain additional funds. He discusses the

problem with his friend Ramesh, who tells him about some other methods like

issue of shares and debentures, which are available only to a company form of

organisation. He further cautions him that each method has its own advantages

and limitations and his final choice should be based on factors like the purpose

and period for which funds are required. He wants to learn about these methods.

Answer 2

Collateral provides a lender recourse to all the personal assets of the entrepreneur

• When an independent entrepreneur typically offers a personal guarantee to a corporation, it properly expresses a legitimate claim on all the entrepreneur's personal properties.  
• In the notable event of any default in the loan repayment, it provides the potential lender with direct access to all the entrepreneur's personal properties.  
• However, the outside collateral is still limited to the particular asset mutually pledged.