Richard Wilson: the gap between a collateral claim and its documentation

A spoken claim that collateral exists was only the beginning of Richard's example. He described investors moving ahead without documenting what had been offered.

The question could reveal another part of the deal

Richard included a question about collateral in his diligence tools discussion. His examples involved assets connected with a business, such as its building or equipment. He described the question as a way to discover something the person raising capital had not volunteered.

The verbal answer did not finish the work

He separately emphasized documentation and actual recourse. In his account, an investor could hear that collateral was available and move too quickly to establish what that meant in the transaction. The recorded lesson is the difference between a claim and the completed terms supporting it.

In Richard C. Wilson's words

"Sometimes investors move too fast. Someone says yes, there is collateral and then they never document that" (Richard C. Wilson, Due Diligence mini-series)

How to use this

Keep the verbal description of collateral separate from the supporting documents.
Identify which part of the claim still needs to be established in the review.

Questions and answers

What gap did Richard describe?

A claim that collateral was available without the documentation to support the investor's understanding.

Did he treat a verbal yes as sufficient?

No. He separately discussed documentation and recourse.