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COMMERCIAL BANKS

GROUP 5

personal assets ( the entrepreneur’s house. • Funds provided are in the form of debt financing and as such require some tangible guaranty or collateral . equipment or the building of the venture). car.• Commercial bank is the source of short-term funds most frequently used by the entrepreneur when collateral is available. land.some asset with value • Collateral can be in the form of business assets ( land. . stocks or bonds) or the assets of the cosigner of the note.

Asset based loans are secured by collateral such as inventory. The loan can be secured by one type of asset or a multiple assets combined • Asset based lending is any kind of lending secured by an asset.Asset based financing and loans • Accounts receivable. if the loan is not repaid. In this sense. or equipment. inventory. a mortgage is an example of an asset-backed loan . the asset is taken. • Proceeds are normally used for business related expenses. This means. accounts receivables. and equipment serve as collateral for an Asset Based Financing or Asset Based Loans.

• It is typically a shorter-term lease and frequently is on equipment where there is a high likelihood of it being raised when the lease ends. trac lease. computers.Equipment financing loans • Equipment financing loans are business loans where equipment serves as collateral. or high-usage copiers. • Type of equipment financing loans: sale/leaseback. • Most equipment leasing plans offer fixed-rate financing. such as high-tech equipment. operating lease . which means the rate stays the same from month to month for the term of the lease.

Inventory financing loans • Inventory loans use your inventory to secure a loan. Inventory loan financing (also known as "Flooring") is the leveraging of inventory using the value of the financed equipment or stock as collateral for the loan. . • Inventory loan financing is a method commonly used when a distributor or reseller needs additional credit and payment terms longer than 30 days in order to maintain a complete stock of inventory for immediate customer availability.

accounts receivable factoring. with its accounts receivable (invoices sent out to clients for goods or services rendered) as collateral. . the less likely they are to be repaid) and so are worth less. • Some lenders will not loan on accounts receivable invoices that are over 90 days old. a company can usually borrow between 60 and 80 percent of their total value.Account receivable loan • Accounts receivable financing. • Depending on the ages of the various accounts receivable invoices. or Accounts receivable loans are loans taken out to provide working capital for a small business. Older accounts receivable invoices are considered higher risks (the older they are.

often up to 75 percent of its value .Real estate • Frequently used in asset-based financing • Mortgage financing usually obtained to finance comp land. or another building. plant.

• Companies are essentially borrowing from cash flows they expect to receive in the future by giving another company the rights to an agreed portion of their receivables. such as meeting payroll requirements. • This allows companies to obtain financing today.Cash flow • used by companies seeking to fund their operations. rather than at some point in the future. or acquire another company or other major purchase. • Timely operational expenditures. would be one reason for cashflow financing. .

Whether you're a small company that needs to buy computer equipment or a large corporation that wants to purchase factory machinery. business installment loans can help you invest in necessary fixed assets while maintaining a working budget .Installment loan • Installment loans are loans that are repaid with a fixed number of payments over a period of time.

• Types of installment: -building -transportation -machinery -equipment and tools .

Straight commercial loan • Def: A loan in which only interest is paid during the term of the loan with the entire principal amount due with the final interest payment. . • Also called a term loan.

inventory or equipment which can then be used to create additional income for the business. Obtaining a long term loan provides a business with working capital that it can use to purchase assets.Long term loan • Def : A form of debt that is paid off over an extended time frame that exceeds one year in duration. .

. Character loan is given on the signature of the applicant without additional guaranty or collateral.Character loan • Def: Good faith(unsecured) loan based on the borrower's financial position. and his or her payment history with the same or other bank(s). and is also called signature loan. reputation in the community.

such as the type of credit facility (example: credit cards. . It supplies the information back to financial institutions. • CCRIS collects and holds credit information of borrowers. conduct of facility and credit limit. as well as relevant data on the credit facilities given to the borrower.Bank lending decision • Central Credit Reference Information System ( CCRIS) is one of the major individual reports used in determining whether one is eligible to borrow from financial institutions regulated by Bank Negara Malaysia (BNM). trade facilities. overdrafts. • The Credit Bureau was established so that financial institutions can make faster and better informed lending decisions. identification number and address. hire purchase and housing loans). • Type of borrower information which is reported by financial institutions to the Credit Bureau include essential identification data such as name.

which is a “mini” business plan • Evaluate alternative banks • Select one with a positive loan experience in the business area • Set an appointment • Carefully present the case for the loan • Borrow the maximum amount possible .“Bank Shopping” procedure • Complete an application.