Accommodation Paper
Barron's Business Dictionary:
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Accommodation Paper
A negotiable instrument signed by a party as maker, drawer, acceptor, or endorser, without receiving value.
It has the purpose of enabling another party to obtain money or credit.
It has the purpose of enabling another party to obtain money or credit.
| Accommodation Endorser, Maker, or Party, Accident and Health Benefits, Accident Insurance | |
| Accord and Satisfaction, Account, Account Executive |
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Accommodation Paper
West's Encyclopedia of American Law:
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Accommodation Paper
This entry contains information applicable to United States law only.
A type of commercial paper (such as a bill or note promising that money will be paid to someone) that is signed by another person — the accommodation party — as a favor to the promisor — the accommodated party — so that credit may be extended to him or her on the basis of the paper.
Accommodation paper guarantees that the money lent will be repaid by the accommodation party on the date specified in the commercial paper if the accommodated party fails to repay it. A lender often uses an accommodation paper when the person who is seeking a loan is considered a poor credit risk, such as a person who has a history of being delinquent in the payment of installment loans. By having a person who is a good credit risk cosign the promissory note, the lender's financial interests are protected.
An accommodation bill and an accommodation note are two types of commercial papers.
Investopedia Financial Dictionary:
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Accommodation Paper
A negotiable instrument that provides a third-party promise of payment in the case that the original borrower does not live up to the terms of the original transaction. Accommodation papers are usually used to support one party's creditworthiness through endorsement by a second party with a better credit rating.
Investopedia Says:
Accommodation papers enable borrowers to obtain loans for which they would not otherwise be qualified, and may also reduce the rate of interest the borrower will be charged. For example, accommodation papers may be used by parents who want to help their children obtain credit for the first time, or by parent companies supporting their subsidiaries.
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Copyrights:
Barron's Business Dictionary
Dictionary of Business Terms. Copyright © 2007 by Barron's Educational Series, Inc. All rights reserved.
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West's Encyclopedia of American Law
West's Encyclopedia of American Law. Copyright © 1998 by The Gale Group, Inc. All rights reserved.
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