How To Use
Stock pledges are customary vehicles to provide lenders with liquidity should a loan go bad, should your stock be publicly traded. It provides some comfort, in any event, even with private stock.
- There is substantial risk in making a stock pledge because, if the loan goes bad, the stock can be sold at an inopportune time for a publicly traded stock and at a severely discounted price if it is in a private company. For the lender, stock pledges are a very valuable commodity for the same reasons they are problematic for the prospective debtor.
- Make multiple copies. Give one to each party. Keep the paperwork in the related files.