Term: Loans And Leases

Overview: The slide-show tells about term loans, provisions of loan agreements, equipment financing, lease financing, evaluating lease financing in relation to debt financing etc. Term Loan is termed as debt originally scheduled for repayment in more than 1 year, but generally in less than 10 years. Credit is extended under a formal loan arrangement. Usually payments that cover both interest and principal are made quarterly, semiannually, or annually. The repayment schedule is geared to the borrower’s cash-flow ability and may be amortized or have a balloon payment. The Costs of a Term Loan The interest rate is higher than on a short-term loan to the same borrower (25 to 50 basis points on a low risk borrower). Interest rates are either (1) fixed or (2) variable depending on changing market conditions -- possibly with a floor or ceiling. Borrower is also required to pay legal expenses (loan agreement) and a commitment fee (25 to 75 basis points) may be imposed on the unused portion. The benefits of a term loan are also discussed in this slide show. Insurance Company Term Loans usually have final maturities in excess of seven years. These companies do not have compensating balances to generate additional revenue and usually have a prepayment penalty. They also talk of Medium-term note and provisions of loan agreements. Lastly it tries to make a trade off between tarde and buy by calculating the PV of cash outflows.

(Is this item miscategorized? Does it need more tags? Let us know.)

Format: HTML | Size: 590KB | Date: Jan 2001 | Pages: 37