This is the thrid in our series of bank loans as a method of raising finance for your small business. This series was started 3 weeks ago. You can get previous publications from our archive to the right of the screen or send an e-mail to coinboxlimited@gmail.com.
IMPORT/EXPORT FINANCE
The bank can fund partially of fully the import/export of products/commodities for a customer. For a bank to carry out such basically, the customer must have shown a track record of having carried out this transaction before (experience). Sometimes, a contribution referred to as equity contribution is required from the customer and in some cases a collateral is required and in some cases, both equity and collateral are sought by the bank.
LEASE/ASSET FINANCE
This is a case where the bank buys an asset on behalf of a customer and leases it to the customer over a defined period for which a monthly rental which includes the bank’s charges will be paid over the tenor of the lease.
Also, it is the situation where the customer of the bank acquires a new location like land/office/factory through the bank. The customer in return pays monthly rentals over the period of the lease.
COMMERCIAL PAPERS (CP’s)/NOTE ISSUANCE AND BANKER’S ACCEPTANCES
This is a way of raising capital where the bank simply shops for investors on behalf of their customer.
The bank customers will issue promissory notes to the investor the bank finds for him/her. Here therefore, the bank does not lend out its existing funds.
For CP’s the bank is not in any way liable to the investor as the bank did not underwrite the credit but for the notes, the bank has liability up to the un-invested portion of the credit.
Where the bank further provides a guarantee on the investment taking full liability, it becomes a banker’s acceptance instrument.
More bank financing types by next post.
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Please note that previous posts on this and other topics are available by just a click on the archive to your right on this blog page.
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