Track 8 of 25

How lenders decide

The arithmetic on the other side of the table. Advance-rate schedules, concentration limits, reclassification, what discretion means in the agreement, and how a rate moves without notice.

25 lessons

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The lender's question is recovery, not repaymentA secured lender underwrites the sale it hopes never to make, which is why your income barely appears in the file.6 min
What an advance-rate schedule actually isOne page assigns a lending percentage to every asset class, and it was written long before anyone read your application.6 min
Why cash and short-duration government paper sit at the topTop-of-schedule assets are not the safest issuers; they are the ones whose price cannot travel far before a sale settles.7 min
Why a single equity sits in the middle, and a thin one near the bottomTwo stocks at the same price can sit thirty points apart on a schedule, and the reason is the order book.7 min
Ineligible collateral: the assets that count for nothingAn asset can be worth real money, sit inside the pledged account, and contribute exactly zero to what may be drawn.6 min
Why the advance rate and the maintenance rate do different jobsThe gap between the two is not redundancy; it is the lender's cure period, bought and paid for with your headroom.6 min
Why the two rates are set by different people on different cadencesOne is a committee decision revisited a few times a year; the other is a batch job that runs every single night.6 min
Concentration limits: the caps written inside the scheduleAn advance rate applies to an asset; a cap applies to its share of the whole, and the lower answer wins.7 min
Issuer and sector limits, and how they aggregateFour separate holdings can be one exposure, and the caps are written against the exposure rather than against the line items.6 min
Position-size limits measured against traded volumeSome caps are written in days rather than dollars, so an unchanged position can breach one week and clear the next.7 min
Reclassification: the same share, a new advance rateNothing about a holding has to change for its schedule row to change; the category it is filed under can move instead.6 min
What triggers an eligibility reviewReviews are mostly fired by a data field changing, not by a person forming an opinion about a particular account.6 min
What discretion means in the agreementNot a mood but a defined power, granted clause by clause, with no obligation on the holder to explain itself.6 min
Sole discretion, reasonable discretion, and the gap between themOne word in front of the noun decides who has to justify what, and most schedules use the word that requires nothing.6 min
When discretion actually gets usedThe powers are broad and the use is narrow, and the pattern of use says more than the width of the clause.6 min
How the rate is built: index plus spreadOne leg is the lender's own cost of money passed straight through; the other is the only part it actually chooses.7 min
How the spread is set: size, collateral, and relationshipThe same institution will price two identical portfolios differently, and the difference comes out of a grid nobody outside sees.7 min
Why the index can move daily and the spread almost never doesOne leg is repriced by a market that needs nobody's permission; the other requires a person to open a file.6 min
How a rate moves without noticeA reset happens because a published number changed, and nothing in that chain requires anyone to tell you first.7 min
Tiered pricing, and why the band matters more than the rateCrossing a threshold by a single dollar can reprice every dollar behind it, which makes a boundary a strange place to sit.6 min
Committed and uncommitted facilitiesOne version obliges the institution to lend and the other obliges nothing, and the lines most individuals hold are the second kind.6 min
Why an uncommitted facility is the cheaper oneThe discount is the price of an option the institution kept, quoted back to the borrower as a thinner spread.7 min
The risk system, the credit officer, and who actually decidesMost decisions affecting a facility are made by software running on a timer, and a person appears only at the exceptions.6 min
Portfolio-level exposure: you are one line in a bookThe limit that binds can be one you have no part in, because it is measured across every borrower the institution has.7 min
Reading a schedule you were given as the policy document it isThe page in your file carries a date, and the date is the most informative thing printed on it.7 min

Educational only. Nothing in this track is investment, legal or tax advice, or a recommendation to enter into any transaction. Completion is stored in this browser and nowhere else.