
Accommodation Endorser
An accommodation endorser is a business that backs the credit liability of another. Similar to the way U.S. Treasuries are fully backed by the U.S. government when a parent company acts as an accommodation endorser, its reputation is now on the line for the loan. When an accommodation endorser or a co-signer lends their endorsement, the borrower benefits from the endorser's credit rating. When one company acts as an accommodation endorser, they put their reputation on the line for another company. An accommodation endorser is the corporate equivalent of a loan co-signer for an individual.

What Is an Accommodation Endorser?
An accommodation endorser is a business that backs the credit liability of another. Generally, the endorser adds strength to the creditworthiness of the financially weaker of the two entities. For example, a parent company often provides accommodation endorsements to a subsidiary. This lets the subsidiary enjoy the parent company's credit rating, in some instances, and often, more favorable loan terms. When one company acts as an accommodation endorser, they put their reputation on the line for another company.





Understanding Accommodation Endorser
An accommodation endorser is the corporate equivalent of a loan co-signer for an individual. Let's say a 19-year-old college student with only a part-time job, and no credit history needs a used car for use during a summer internship. This student's parent may need to co-sign the auto loan, indicating that they are responsible for the debt if the student defaults.
Similarly, say a subsidiary company applies for a loan, but it's not entirely foolproof that this entity can pay due to its below-par balance sheet. In this case, the parent company becomes the accommodation endorser. This provides a promise to the bank that the parent company, with far more assets, will pick up the loan if the original borrower defaults.
Accommodation endorsers are exceptionally helpful to small companies. For the large parent companies, however, the endorsements don't always work out. The bank, or holder of the banknote if the loan is resold, can then go after the parent company if they are not getting paid. This is meaningful if the smaller entity borrowed substantially.
From a practical perspective, all an accommodating endorser must do is sign on the dotted line, indicating that this group is the financial backstop for the smaller organization or subsidiary.
Similar to the way U.S. Treasuries are fully backed by the U.S. government when a parent company acts as an accommodation endorser, its reputation is now on the line for the loan.
Special Considerations
Note that an accommodation endorser isn't always a parent company. However, it almost always has a close relationship with the borrower. Therefore, a larger company may provide an accommodating endorsement for one of its critical suppliers. A large soda company might want to be the accommodation endorser for one of its bottlers, for example.
Accommodation endorsement also happens among the keiretsu structure of companies in Japan, where a group of enterprises take equity stakes in one another and sometimes collaborate and share projects. Again, it's the strongest of these companies providing the accommodation endorsement for the others.
Related terms:
Accommodation Endorsement
An accommodation endorsement is a written agreement from one business entity to back the credit liability of another. read more
Cosign
To cosign is to sign jointly with a borrower on a loan to help a borrower obtain a loan or receive better terms on the loan. read more
Cost of Attendance (COA)
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Dodd-Frank Wall Street Reform and Consumer Protection Act
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Financial Guarantee
A financial guarantee is a non-cancellable promise backed by a third party to guarantee investors that principal and interest payments will be made. read more
Joint Bond
A joint bond, also called a joint-and-several bond, is guaranteed by both its issuer and at least one other party. read more
Parent Company
A parent company is a maintains a majority interest in another company, giving it control of its operations. read more
Quarterly Income Preferred Securities (QUIPS)
Quarterly Income Preferred Securities (QUIPS) are bonds that trade like stocks, letting companies raise funds and investors reap dividends. read more
Self-Employment
A self-employed individual does not work for a specific employer who pays them a consistent salary or wage. read more
Subsidiary
A subsidiary is an independent company that is more than 50% owned by another firm. The owner is usually referred to as the parent company or holding company. read more