Categories of lending

A term loan is normally extended for a period of one year or more, constituting an agreement by the borrower to repay the principal sum advanced at the end of the loan term, together with interest, at either a fixed or variable rate.

Credit products are mechanisms and structures through which financial institutions provide credit to customers, often referred to as credit facilities.

Term loans are primarily used for long-term financing requirements, usually with maturities from 1 to 5 years, but can extend to 7 to 10 years or longer, often for capital expenditures.

A financial lease is a legal mechanism through which credit can be provided to a customer.

The risks include exposure equal to the full amount of unpaid principal and interest due to bullet repayment terms.

Overdraft facilities are commonly used to provide working capital to companies during the cycle of manufacturing or providing goods or services, with limits typically reset on an annual or similar periodic basis.

Term loans represent the simplest type of loan, being for a fixed term.

As a rule, the commodities are required to be stored at a bonded warehouse, in which case a warehouse receipt serves as title to the goods.

Short-term advances usually are working capital loans, sometimes part of a larger arrangement, with a maturity not exceeding one year.

Bridge loans are a type of short-term advance that is advanced in contemplation of longer-term funding being put in place.

Risks associated with loans include the potential for default, interest rate fluctuations, and the impact on the borrower's credit score if payments are missed.

Syndicated lending is a process where multiple lenders come together to provide a loan to a single borrower, typically for large-scale financing needs.

Credit cards offer convenience, rewards programs, fraud protection, and the ability to build credit history.

Since call loans have no fixed duration, exposure risk excludes anticipated future interest income beyond the notice period.

Securitization began in the 1970s and grew explosively during the 1980s and 1990s.

The exposure risk of rollover loans will vary according to the amount of principal and interest outstanding in accordance with the loan provisions.

The title documents (e.g., warehouse receipt, bill of lading) to the commodities to be sold function as collateral for the loan.

Call loans may be terminated before maturity by either party, but notably by the lender.

Acceptance borrowings, such as bankers' acceptances, are financial instruments used in asset-based and receivables finance to facilitate trade transactions.

Repayment terms for a standby facility are usually fixed rather than flexible.

A flexible loan from a financial institution that allows the borrower to access funds up to a specified limit as needed.

A multipurpose facility is a variant facility that may incorporate characteristics of overdraft facilities, revolving credit facilities, and standby facilities.

Factoring is the purchase of debts by a lending institution, where the lender buys the trade debts of a business and pays the business in cash after deducting a commission.

Disadvantages include high-interest rates, potential for debt accumulation, fees, and the risk of overspending.

Export loans are a form of credit primarily used to finance the export of capital goods, where the overseas purchaser will not pay the entire cost at delivery but will finance the balance over a period of time, typically more than one year.

A Rollover Loan is a type of short-term loan that can be extended or renewed upon maturity, often with additional fees or interest.

Revolving credit facilities are lines of credit that allow borrowers to withdraw, repay, and borrow again up to a certain limit.

Typical Terms and Usage of a Facility include the amount of credit available, interest rates, repayment schedules, and conditions under which the facility can be accessed.

A lessee is the borrower in a lease agreement who receives equipment from the lessor and makes periodic payments.

Financial leases have a different legal form from loans but serve a similar function in providing access to equipment.

Loans that are categorized based on the geographical location of the borrower or the area where the loan is utilized.

A financial transaction where a business sells its accounts receivable to a third party at a discount to obtain immediate cash.

Syndicated lending is a process where multiple lenders come together to provide a loan to a single borrower, typically for large amounts that would be too risky or large for a single lender to handle alone.

A credit card is a line of unsecured credit evidenced to merchants by means of a plastic card that contains identifying data about the facility established with the card issuer.

Syndicated lending is a process where multiple lenders come together to provide a loan to a single borrower, typically for large amounts that would be too risky for a single lender to handle alone.

Risks include asset depreciation, changes in market conditions affecting asset value, and potential cash flow issues.

A rollover loan is a special category of term loan, equivalent to a revolving line of credit, with a fixed interest rate for a limited period, usually ranging from one month to one year, and preagreed extensions based on predefined criteria.

A Term Loan is a loan for a specific amount that is paid back with interest over a set period, typically used for financing long-term investments.

Asset-based finance refers to financing provided to merchants and manufacturers to support domestic and overseas trade, often categorized as types of export financing or commodity financing.

Multipurpose facilities are lines of credit that can be used for various financial needs, providing flexibility to the borrower.

Export financing includes various financial instruments, such as trade finance and Letters of Credit, that support businesses in exporting goods and services.

A financial arrangement where a business can use equipment without purchasing it outright, paying a lease fee instead.

A call loan is a loan extended for an indefinite period, which may be terminated at any time by either party upon notice according to the loan terms.

Export financing encompasses a number of products, including loans directly to exporters, for further extension to importers, or directly to the importers or their banks.

A facility is an arrangement made by a financial institution with a customer to provide a given type of credit support, encompassing a broader group of credit products than loans.

A bridge loan is a type of short-term advance utilized to cover an anticipated gap between the time payment arising from a given transaction is confirmed and the actual receipt of the proceeds pursuant to the settlement of the transaction.

Acceptance borrowing refers to the use of bankers’ acceptances, also known as bills of exchange, to finance the import or export of goods. It obligates the bank that accepts it to pay its face value to the bearer at maturity.

A type of credit derivative that allows an investor to 'swap' or transfer the credit risk of a borrower to another party.

A standby facility is similar to an overdraft facility but has a longer tenor to meet specific needs, incurs exposure during both the exercise period and repayment period, and may be provided on a multicurrency basis.

Loans that are categorized based on the collateral or security provided by the borrower to secure the loan.

Traditional products in Categories of Lending refer to standard loan offerings that do not involve complex financial structures.

Syndicated lending involves two or more lenders jointly meeting the large financial needs of a corporate customer.

Trade finance relates to financial activities designed to support and facilitate commerce and international trade.

Trade finance works by reconciling the divergent needs of exporters and importers.

Note-issuance facilities are provided in connection with a note-issuance program whereby a bank or a group of banks underwrites a borrower’s issuance of short- or medium-term notes in the money or capital markets.

A line of credit is a commitment by a financial institution to advance funds up to a designated maximum during a given period.

The process of bundling various financial assets, such as loans or receivables, and selling them as securities in the market.

Bankers’ acceptances are negotiable time drafts that facilitate trade by allowing merchants to substitute a recognized bank’s creditworthiness for their own, historically functioning as a form of money.

A lessor is the lender in a lease agreement who hires out specific equipment to the lessee.

A standby facility is typically used for backup purposes to assure customers that credit will be available for major transactions such as large investments or acquisitions.

Floating-rate loans have interest rates that can change over time, while fixed-rate loans have a constant interest rate throughout the loan term.

The customer base in Categories of Lending refers to the specific groups targeted for loans, such as consumers, small businesses, or blue-chip industrials.

Reasons include limited resources, risk, and regulations.

Call loans are generally used for temporary financing needs of an uncertain duration, with notice of termination typically required every day before 12.00 A.M., and final repayment must be made within two working days.

Short-term advances are customarily for a round number of months or days and are used for working capital finance or other short-term needs.

Liquidity-support facilities are used to provide liquidity in connection with securitizations, such as the origination of mortgage-backed securities (MBS) by a customer.

The credit exposure in respect of overdraft facilities incorporates a maximum or nominal exposure figure equal to the amount of credit advance permitted under the facility and the expected exposure.

Product Type refers to the classification of financial products based on their characteristics, such as loans, credit lines, or leasing options.

Lease finance refers to a financial arrangement where a lessor hires out specific equipment to a lessee, who makes periodic payments and may take full title to the equipment at the end of the lease period.

Commodity financing is a type of financing that supports the purchase and sale of commodities, often used in conjunction with asset-based and receivables finance.

Categories of Lending by purpose of loan refer to how customers plan to use the proceeds from their loans.

Securitization is the process of pooling various types of debt and selling them as consolidated financial instruments to investors.

Trade finance refers to the financing of international trade transactions, providing the necessary funds and credit to facilitate the import and export of goods and services.

A short-term advance is a loan extended for a period of between one day and one year, whereby a single bullet payment is made at maturity.

Specialized facilities include note-issuance facilities and liquidity-support facilities, which are used in connection with note-issuance programs and securitizations.

Export credit insurance, provided by export credit agencies, is purchased to mitigate risks associated with export financing.

A wider range of financial instruments such as bonds, syndicated loans, mortgages, and credit card receivables that are bundled together and sold as securities in the market.

The risks are the same as other short-term advances of fixed maturity.

Financial instruments whose value is derived from the credit risk of an underlying asset, including products like credit default swaps and collateralized debt obligations.

Categories of Lending by maturity of loan are defined by the length of the borrowing period, distinguishing between short-term and long-term loans.

A financing arrangement where investors provide capital in exchange for ownership equity in a business.

A revolving credit facility is similar to a rollover loan, with the main difference being that revolving credit facilities do not have maturities of greater than five years.

A type of financing where a borrower uses their assets, such as inventory or receivables, as collateral to secure a loan.

Securitization is the process of aggregating traditionally illiquid loans into pools and repackaging them into new relatively liquid securities that are sold to investors.

An overdraft facility is a credit arrangement under which a bank advances funds to a borrower in varying amounts up to a specified limit, with flexible repayment obligations within predefined parameters.

Overdraft facilities are a type of line of credit that allows an account holder to withdraw more money than is available in their account, up to a specified limit.

Rollover loans are essentially term loans that renew upon maturity according to predetermined criteria.

Receivables finance is a type of financing that allows businesses to borrow against their accounts receivable, providing liquidity for operations and trade.

Specialized facilities include specific types of lines of credit such as note issuance facilities and liquidity support facilities, tailored for particular financial needs.

Loans that are categorized based on the characteristics or classification of the borrower, such as individual, business, or government.

A type of financing where a loan is secured by an asset, such as inventory or receivables, allowing businesses to leverage their assets for funding.

Multipurpose facilities are used to provide both working capital and longer-term finance to customers.

An amortizing term loan means that the principal balance is gradually reduced during the term of the loan.

Typically involves short-term loans secured by assets, often used for working capital or to finance growth.

The process of securitization involves pooling various financial assets, creating securities backed by these assets, and selling them to investors, thereby transferring the risk and providing liquidity.

An overdraft facility is a credit arrangement under which a bank advances funds to a borrower in varying amounts up to a specified limit, allowing flexible repayment obligations within predefined parameters.

Commodity financing refers to the financing of a designated quantity of commodities such as agricultural products, mineral products, petroleum products, and so on in advance of sale. Hence, they are ordinarily short-term in character.

A type of securitisation where various loans are pooled together and sold as a single security, often used in high-profile bank loan securitisations.

Loans are financial products that involve borrowing a sum of money from a lender with the agreement to repay it, typically with interest, over a specified period.

Typical terms of loans include the loan amount, interest rate, repayment schedule, and duration, which vary based on the type of loan and the lender's policies.

Loans that are categorized based on the duration for which the loan is taken, such as short-term, medium-term, or long-term loans.

Categories of Lending defined by customer franchise consider the types of customers and business sectors that the loans are marketed to.

A loan is a legally binding agreement between a lender and a borrower where the lender advances a certain sum of money to the borrower for a specified period, and the borrower agrees to repay the principal with interest as outlined in the loan agreement.

The rationale for securitization is to convert illiquid assets into liquid securities, allowing for better risk management, increased capital efficiency, and access to a broader range of investors.

The risks include loss of principal advanced and anticipated interest payments, with exposure risk for loans with bullet repayment terms remaining constant until maturity.

A Line of Credit is a flexible loan from a financial institution that allows the borrower to access funds up to a specified limit at any time, paying interest only on the amount drawn.

A Facility refers to a financial arrangement or service provided by a lender to a borrower, typically involving a specific amount of money that can be drawn upon as needed.

Standby facilities, or standby rollover facilities, are lines of credit that are available for use in case of emergencies or unexpected expenses.

Modern bankers’ acceptances ordinarily have a maximum tenor of six months.

The Product Type of Loans refers to the various forms of loans available, such as personal loans, mortgages, auto loans, and student loans.

At the end of the lease period, the lessee may exercise the option to take full title to the equipment.

In Categories of Lending, secured loans are backed by collateral, while unsecured loans do not require collateral.

Loans that are categorized based on the intended use of the funds, such as personal loans, business loans, or educational loans.

The process where multiple lenders come together to provide a loan to a single borrower, sharing the risk and funding.

Credit facilities are the collective term for the various products and mechanisms through which credit is provided by financial institutions.

The maturity of rollover loans may be as long as 7 to 10 years, but they can also be used for short-term credit provisions in response to a customer’s working capital needs.

Bridge loans are usually of a fixed term, often less than one month, as the duration between consummation of the transaction and settlement can be estimated with a high degree of probability.

The Risks associated with a Facility include credit risk, interest rate risk, and operational risk, which can affect the borrower's ability to repay the borrowed amount.

A standby rollover facility is a standby facility structured to be extended on a rollover basis.

Industry sector in Categories of Lending refers to the classification of loans based on the specific industries they serve, such as agriculture or heavy industry.

Loans that are categorized based on the industry or sector in which the borrower operates, such as agriculture, manufacturing, or services.

Syndicated lending involves multiple lenders coming together to provide a loan to a single borrower, spreading the risk among them.

Broad product categories in Categories of Lending include various financial products such as loans, receivables finance, and documentary trade finance.