Bank president Spencer had approved significant loan amounts to Berry for the purpose of developing a shopping center.Spencer was satisfied that the land collateralizing the shopping center loan was sufficient,and Spencer was not particularly concerned about that loan.Berry,however,requested an additional loan for the purpose of starting a temporary employee agency.Berry offered to collateralize that loan with office equipment,but Spencer was uneasy that such collateral was insufficient.If Spencer decides to go forward with the loan involving the temporary employee agency,which of the following is true regarding Spencer's options?

Question

Quizplus · Accepted Answer

A cross-default provision would allow Spencer to declare the temporary employee agency loan in default if Berry is in default on the shopping center loan. A cross-collateralization provision would allow Spencer to use the office equipment as collateral for both loans, increasing the security of the additional loan. Cross-collateralization provisions are generally enforceable under Article 9, as long as the requirements for attachment, perfection, and priority are met.

Bank President Spencer Had Approved Significant Loan Amounts to Berry