First loss default guarantee structure with NBFC


Hi. Ours is a private limited company and we are connecting a partner NBFC with clients for loans. Even though loans will be given through the NBFC books, we will assume a certain level of defaults. I have read about FLDG structure where we can take the first x% hit on defaults. I wanted to know how is the legal structure set for this, as in would it be a simple agreement between us and NBFC and we will put some capital in a separate account (against FLDG) and that's it. Or there could be specific legal hurdles in this? Thanks

Answers (1)


237 votes

Without seeing your agreement or their terms and conditions , it is not fair on my part to advise you either way.
I would suggest you to email copies to your Lawyer for perusal before you execute them.
Without consulting Lawyer prior to execution, cost clients many times.


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