About guarantees and subordination agreements

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Background

As you recall, Dry Supply has requested a loan of approximately $60,000 to purchase three new delivery vans in the coming year. On December 31, 20x2, Dry Supply had borrowed $67,000 from owner Kaitlyn Nieson. To provide support to the loan request, in addition to the personal guarantees of the owners, State Bank may ask Ms. Nieson to subordinate to the bank the debt owed to her from Dry Supply.

Dry Supply's financial information and apply what you have learned about guarantees and subordination agreements. If needed, you can refer to the income statements and balance sheets for Dry Supply in Appendix A.

1. What are two ways that State Bank can ask that the loan from Dry Supply be sub- ordinated?

2. What steps can State Bank take if Ms. Nieson has secured her debt with a lien on a specific piece of equipment?

American Bankers Association

Commercial

Reference no: EM133272800

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