Secured Loans Singing a Swan Song

Tighter lending criteria and higher interest rates are causing a handful of secured loan organizations to close up shop. And that should be a warning for any budding entrepreneur looking to put up their own personal collateral to secure financing for a business start-up. The cold, harsh reality is this is a dangerous proposition that could leave you blowing in the wind

Barclays Closes FIRSTPLUS Financial Group
The UK’s largest provider of secured personal loans is feeling the brunt of the credit crunch. While FirstPlus isn’t the first lender to exit the market for secured loans, it is the largest. And that is a fairly good indicator of the impending crisis. As traditional lenders have all but cut-off lending for newbies and the unestablished, it seems as though alternative lenders could be following suit. Still, potential business owners, many with stars in their eyes, are continuing to put up their own personal collateral in an effort to nab the start-up capital they need.

Collateralized Loan Obligation: Trick or Treat?
At first glance, CLOs look dangerous. According to BusinessWeek, “CLO managers essentially buy a bunch of loans arranged by banks, package them together into a pool, and then carve out different securities to sell to investors, taking a fee for their troubles.” Ironically, this process is pumping up the economy by lowering borrowing costs, attracting foreign capital and helping to keep a lid on interest rates. However, CLOs come with potential business rearrangements that could take some of the control that the owners enjoy.