Verpanding
Pledging
Pledging is the creation of a pledge over movable property or receivables as security for the performance of an obligation.
Pledging is a form of security whereby the owner of an asset grants a pledge in favour of a creditor. This is effected by means of a deed of pledge and, in the case of movable property, often by delivery of possession or registration.
This is relevant because, in the event of default, the pledgee may sell the pledged asset and have recourse to the proceeds. Pledging thereby affords financiers a strong position and is widely used in connection with bank lending.
In practice, pledging is common in the financing of companies, where inventory, receivables or machinery serve as collateral.
“The bank required a pledge over the business inventory before granting the bridging loan.”
Related terms
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