Ch.24 erm loans and leases ISE S】 o 2002. Prentice Hall. Inc
Ch. 24: Term Loans and Leases © 2002, Prentice Hall, Inc
Term loans Characteristics of Term Loans Secured loans 1-to 10-year maturity Repaid in periodic installments
Term Loans Characteristics of Term Loans • Secured loans • 1- to 10-year maturity • Repaid in periodic installments
Term loans Collateral for shorter loans Chattel mortgage(mortgage on machinery and equipment) Collateral for longer loans mortgages on real estate
Term Loans Collateral for shorter loans • Chattel mortgage (mortgage on machinery and equipment) Collateral for longer loans • mortgages on real estate
Term loans Restrictive covenants on borrowers Working capital borrower may be required to set a minimum current ratio Restrictions on additional borrowing Borrower provides periodic financial statements。 Restrictions on management changes
Term Loans Restrictive Covenants on Borrowers • Working capital - borrower may be required to set a minimum current ratio. • Restrictions on additional borrowing. • Borrower provides periodic financial statements. • Restrictions on management changes
Term loans Eurodollar loans Loans by major international banks based on foreign deposits denominated in dollars Adjustable interest rates based on the london interbank Offered Rate liBor)
Term Loans Eurodollar Loans • Loans by major international banks based on foreign deposits denominated in dollars. • Adjustable interest rates based on the London Interbank Offered Rate (LIBOR)