You can design an agreement with a warranty contract model. The following must be taken into account: In a cash guarantee agreement, a borrower agrees to place money in a bank account or trust fund as a financial guarantee, so that the lender can regularly withdraw cash from that account to repay the loan. Essentially, the cash in the backup account no longer belongs to the debtor. For example, a bank accepts a $1 million secured loan from a company and asks executives to post guarantees in the form of long-term assets, short-term resources or cash. Senior management decided that it was strategically wise to use cash instead of equipment, and then ordered corporate treasurers to transfer $1 million to a newly created assignment account. During the amortization period of the loan, money will come from this account to pay off the debt. When a bank or other lender provides a business loan, the entity may have to terminate its inventory and collateral receivables to insure the loan. Unlike a home, debtors and stocks change every day: stocks are used, sold and replaced, debtors fluctuate when selling products or new accounts are opened when stocks are sold on credit. Cash security is a means of payment and equivalents collected and held in favour of creditors in Chapter 11 bankruptcy proceedings. Tradable instruments, property documents, securities and deposit accounts include tradable instruments and cash equivalents. Unless otherwise required by a court, cash security is separated from other assets for the purpose of paying creditors. The money cannot be used by the debtor without the creditor`s consent or by court order.
In practice, a creditor may be available to the debtor who uses the money to continue his activities in order to relieve his financial difficulties. However, if a new device is purchased with cash. B, the device will replace as collateral the cash. This type of substitution is governed by section 361 of the Bankruptcy Act, which requires „adequate protection“ for an insured creditor to „ensure the loss of value of its security.“ A debtor may be ordered by the court to grant a replacement guarantee, as in the figure above, or to make periodic cash payments when the value of the entire cash guarantee account begins to decline. The cash guarantee must ensure that the lender`s loan does not become an unproductive debt. Assets in the account benefit the lender and the lender can withdraw money from the account at regular intervals. The lender guaranteed repayment of all principal and interest related to the loan.