(Download) "Mid-State Fertilizer Co. V. Exchange National Bank Of Chicago" by United States Court of Appeals for the Seventh Circuit ~ eBook PDF Kindle ePub Free
eBook details
- Title: Mid-State Fertilizer Co. V. Exchange National Bank Of Chicago
- Author : United States Court of Appeals for the Seventh Circuit
- Release Date : January 19, 1989
- Genre: Law,Books,Professional & Technical,
- Pages : * pages
- Size : 81 KB
Description
Mid-State Fertilizer Co. sold fertilizer in mid-state Illinois. It needed money to buy supplies, pay its workers, and run the business until it could collect from customers. Mid-State arranged for revolving credit from the Exchange National Bank of Chicago, which promised to lend Mid-State 70% of its inventory and receivables to a maximum of $2 million; Mid-State promised to direct its customers to make all payments to a postal box that Exchange would control (the "lock box"). Exchange would retrieve the checks and deposit them to an account from which it alone could withdraw cash (the "blocked account"). After the instruments cleared, Exchange applied the money to pay amounts due on the loan; anything left over Exchange would deposit to Mid-State's operating account. Exchange also deposited advances into the operating account when notified by Mid-State that new inventory was available for sale. So Mid-State received money both from advances and from the excess of receivables over what was necessary to repay the bank. Exchange's arrangement with Mid-State was a variant of factoring, which banks call "asset-based financing". See Grant Gilmore, 1 Security Interests in Personal Property 129-33 (1965). Unlike traditional factoring, this arrangement did not shift to the lender the risk of customers' defaults. Mid-State remained liable for the full amount of any loan; Exchange also took guarantees from Lasley and Maxine Kimmel, Mid-State's sole shareholders.