New system of collateral going into effect

Next week a law will go into effect that will permit the use of using additional forms of security to secure loans.

The system is expected to help small businesses that do not have real estate to secure agreements with creditors.

The Registro Nacional was given a year to set up a system much like the one that exists for real estate to show what has been secured by a loan.

Borrowers will be able to use patents, accounts receivables, contracts, crops in the ground and even cattle, according to a summary provided Monday by the Ministerio de Economía, Industria y Comercio.

Public officials, including President Luis Guillermo Solís, met to outline the benefits of the law, which goes into effect May 20.

Of course in the past, lenders were able to accept material that was not real estate as collateral, but they might have had trouble collecting if the loan went into default. In addition there was no system to show if the personal property already had been used to secure an earlier loan.

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