Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Lender

What it is:

A lender is a creditor or any entity to which you owe money for services provided.

How it works (Example):

If you borrow money from XYZ Bank, XYZ Bank becomes your lender. Lenders are creditors, but not all creditors are lenders. For example, utility companies, health clubs, phone companies and credit card issuers can all be creditors if you have contracts with them or if they have performed services for which you have not yet paid.

Some lenders are more senior than others. For example, if Company XYZ issues bonds, the bondholders are essentially lenders who are senior to Company XYZ's shareholders. This means that should Company XYZ go bankrupt, the bondholders are entitled to repayment before the shareholders are.

In many cases, companies have several different types of debt, and some of these lenders may be subordinate to others. Some lenders may even be unsecured, meaning that the company has not pledged any collateral.

Why it Matters:

Lenders may sue to obtain access to accounts or other assets if the borrower has not paid. Lenders may also place liens on the borrower's assets, meaning that the borrower cannot sell the assets without paying the lender first.  In addition, lenders could report the problem to a credit bureau, which may place the item on the borrower's credit report.

Related Terms View All
  • Yupcap
    Let's say Jane Doe has a master's degree and is an editorial assistant in San Francisco....
  • Real-Time Quote
    A stock quote is an estimate of price or a price at which one party is willing to buy or...
  • Vittorio Mincato
    Born in 1936, Mincato is an accountant on paper. His first any only employer was Italian...
  • Baby Bills
    With its Windows and Office products, Microsoft has dominated the market for computer...
  • Salary Freeze
    For example, Company XYZ makes widgets. Company ABC recently launched the new iWidget,...