Collateral Transfer

The term collateral transfer denotes an arrangement by which one company lends its assets to another company for use as collateral in order for the borrowing company to access business loans.

The company which lends its assets is referred to as the provider. The company which borrows assets is referred to as the beneficiary. The two companies enter into a collateral transfer agreement. The collateral transfer agreement is normally mediated by a bank or specialized collateral transfer service provider.

Typically, the collateral used for collateral transfer is comprised of bank guarantees. For this reason, collateral transfer is often referred to as bank guarantee leasing.

The beneficiary pays the provider interest in the form of a contract fee.