Co-borrowers or guarantors - does it matter? Financing affiliated companies
An article by John A. Beckstead, Partner, Snell & Wilmer L.L.P., Salt Lake City Factors are often asked to finance affiliated companies in a single financing package. Most commonly, the affiliation between the companies consists only of common ownership of the companies by the same person. Sometimes there is a parent-subsidiary relationship or sometimes the companies are sister subsidiaries of the same parent. From a credit standpoint, it is attractive to create a single financing package. A larger pool of collateral is available for the obligation and the aggregate lending limit will be higher than for any individual company. However, there are serious legal risks in this strategy. Proper legal structure of the financing will minimise these risks.
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