Intermediate Term Financing
INTERMEDIATE TERM FINANCING
Intermediate term financing refers to borrowing with repayment schedules of more than one year but less than ten years. In contrast ‘short –term financing has a repayment schedule of less than one year, while long-term financing matures in ten years or longer.
ADVANTAGES OF INTERMEDIATE TERM FINANCING
Intermediate term financing offers the following advantages to the firm;
1. It provides a useful alternative when the firm is unable to continue expanding assets with internal or short-term funds;
2. It provides a source of funding for small businesses which do not have ready access to capital markets;
3. It provides an alternative which at times may be less costly and more convenient than the raising of funds through the flotation of bonds or stocks in capital markets;
4.Tax advantages are sometimes derived from the exercise.
5. Intermediate term financing allows the firm to borrow funds with only the amounts needed at each stage of financing as required.
TERM LOANS BY PRIVATE FINANCIAL INSTITUTIONS
Intermediate term financing is provided by private commercial banks, finance companies, factors, insurance, and pre-need companies.
TERM LENDING BY PRIVATE COMMERCIAL BANKS Private commercial banks [PCBs]constitute an easily identifiable source of term loans. The extensive network of branches of PCBs provide easy access to intermediate term credits. Example of banks with branches spread all over the Philippines are the Philippine National Bank and Metropolitan Bank and Trust Company. TERM LOAN DEFINED A term loan is a bank advance for a specific period [normally one to ten years] repaid, with interest, usually by regular periodic payments.
TYPES OF TERM LOAN [1.] Straight term loan.
[2.] Revolving credit.
[3.] Evergreen credit. The straight term loan is granted to finance fixed assets. It is also granted to fund permanent working capital needs and to temporarily replace
Intermediate term financing refers to borrowing with repayment schedules of more than one year but less than ten years. In contrast ‘short –term financing has a repayment schedule of less than one year, while long-term financing matures in ten years or longer.
ADVANTAGES OF INTERMEDIATE TERM FINANCING
Intermediate term financing offers the following advantages to the firm;
1. It provides a useful alternative when the firm is unable to continue expanding assets with internal or short-term funds;
2. It provides a source of funding for small businesses which do not have ready access to capital markets;
3. It provides an alternative which at times may be less costly and more convenient than the raising of funds through the flotation of bonds or stocks in capital markets;
4.Tax advantages are sometimes derived from the exercise.
5. Intermediate term financing allows the firm to borrow funds with only the amounts needed at each stage of financing as required.
TERM LOANS BY PRIVATE FINANCIAL INSTITUTIONS
Intermediate term financing is provided by private commercial banks, finance companies, factors, insurance, and pre-need companies.
TERM LENDING BY PRIVATE COMMERCIAL BANKS Private commercial banks [PCBs]constitute an easily identifiable source of term loans. The extensive network of branches of PCBs provide easy access to intermediate term credits. Example of banks with branches spread all over the Philippines are the Philippine National Bank and Metropolitan Bank and Trust Company. TERM LOAN DEFINED A term loan is a bank advance for a specific period [normally one to ten years] repaid, with interest, usually by regular periodic payments.
TYPES OF TERM LOAN [1.] Straight term loan.
[2.] Revolving credit.
[3.] Evergreen credit. The straight term loan is granted to finance fixed assets. It is also granted to fund permanent working capital needs and to temporarily replace