FIRE'd@51
Thinks s/he gets paid by the post
- Joined
- Aug 28, 2006
- Messages
- 2,433
So your recourse would be Chicago Title. It appears that you are loaning them money to create an escrow account for the restaurant owner to satisfy the state of California's liquor license requirement. The title company is borrowing the money from you (and others) and charging the restaurant owner(s) a fee (greater than the interest they are paying you) for setting up this escrow account. It seems the risk here is that clients of Chicago Title don't get the license and don't pay the fee leaving the title company with insufficient cash flow to pay interest to all of their lenders, ultimately forcing the title company into bankruptcy. I would want to find out everything I could about Chicago Title. If it's a highly levered entity (which I suspect it is), I can see how it could go "POOF".How did it go POOF?
The loan is used to allow restaurant owners to not tie up capital while waiting for a liquor license. California requires proof of capital (in this case, in an escrow account). If the license isn't approved, nothing happens. If it is approved, the restaurant owner pays for the license (to the state) and the borrowing fee, so in either case the money in escrow in always in the lenders name, the "borrower" never actually has access to it.