Loans for construction purposes which are known as construction loans.Loans for the purchase of equipment which are known as equipment financing.Loans for the purchase of commercial real estate which are known as CRE loans.There can also be further sub-classifications based on purpose which include: For example, Line of Credit, OD, CC, BD, LC, BG etc. Opex: If the loan is given for day-to-day operations of the business i.e., to fund the current assets or short-term assets of the business entity i.e, opex, it is known as working capital. Purpose of loanĬapex: If the loan is given for acquisition of fixed assets or long-term assets i.e, capex, it is called a term loan (including short term, medium term, and long term) For example, Letter of Credit (LC), Bank Guarantee (BG), etc. Fund outlay is a contingent event here that may occur at the time of default. Non-fund based – In which there is no upfront outflow of funds by the bank, and only certain paper commitments and binding contracts are entered into. For example – term loans, OD, CC, LAP, HL auto loans, etc. Upfront outflow of the banking fundsįund based – In which there is a direct dispensation of funds by the lender to the borrower and the bank needs to keep the funds available based on the time duration of facilities. The different types of commercial lending depend on: 1.
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