1. FINANCIAL INSTRUMENTS PROVIDED BY BANKS:
SBLC PROVIDERS:
SBLC/BG Providers are a rare breed and are extremely difficult to find. Providers do not advertise
themselves or send emails soliciting business from clients. They are ultra-high net-worth corporations or
individuals or funds and they hold a commanding position in the financial sector. Their businesses span
across finance, banking, capital markets, oil & gas, commodities trading, manufacturing, IT, etc. More
often than not, dealing in Financial Instruments is only a small portion of their business interests.
Standby Letter of Credit or Bank Guarantee (SBLC/ BG) Providers are mostly active in the
secondary and tertiary markets.
A Provider for SBLC/BG would often be a collateral management firm, a hedge fund, a Financial
Holding Company (FHC), a non-bank commercial company, or a private equity company. They are
high net worth corporations or individuals who hold bank accounts at a bank that holds either
large sums in cash deposits, bonds, or other forms of security that can turn into legal tender. Basically,
in most cases, these are liquid assets at the immediate disposal of their owner. Whenever the occasion
arises, a Provider instructs his bank to secure and encumber liquid assets/ cash in his own account and
authorizes the bank to "cut" (an industry term meaning to create a financial instrument such as SBLC
or BG.
2. BANK GUARANTEE PROVIDERS ?
This is a bank or financial institution that provides bank guarantees and other bank financial
instrument to its customers for specific purposes. The financial instruments such as bank guarantees
and standby letters of credit can be used to obtain loans from banks; they also can be used for trade
finance as well as import and export transactions.
What Is a Lender?
A lender is an individual, a group (public or private), or a financial institution that makes funds
available to a person or business with the expectation that the funds will be repaid. Repayment
will include the payment of any interest or fees. Repayment may occur in increments (as in a
monthly mortgage payment) or as a lump sum. One of the largest loans consumers take out from
lenders is a mortgage.
LOAN LENDERS:
Every currency counts at this time, and you can’t afford to lose any opportunity to make savings on your
loan. Besides, it’s not just about the interest rate or overall cost, you also need to be sure you are
getting the most favorable terms possible. One major challenge most people face is that the offers from
most if not all lenders are different, so it may be like comparing apples with oranges.
3. COST OF LOAN?
The cost of the loan is not just the lending rate and in fact, the lending rate needs to be converted to
effective annual interest rate to ensure you are comparing apples-to-apples.
HOW DO LENDERS MAKE LOAN DECISIONS?
Qualifying for a loan depends largely on the borrower’s credit history. The lender examines the
borrower’s credit report, which details the names of other lenders extending credit (current and
previous), the types of credit extended, the borrower’s repayment history, and more. The report helps the
lender determine whether—based on current employment and income—the borrower would be
comfortable managing an additional loan payment. As part of their decision about creditworthiness.
To find out whether you’re ready to take on new debt, you can measure your credit status against the
criteria that lenders use when they review your application. When you apply for a new credit account,
lenders evaluate your application based on key factors commonly known as the 5 Cs of Credit.
Each lender has its own method for analyzing a borrower’s creditworthiness. Most lenders use the five Cs
when analyzing individual or business credit applications. These are:
4. 1. CREDIT HISTORY
Your credit history is a record of how you’ve managed your credit over time. It includes credit
accounts you’ve opened or closed, as well as your repayment history over the past 7-10 years. This
5. information is provided by your lenders, as well as collection and government agencies, to then be
scored and reported.
A good credit score shows that you’ve responsibly managed your debts and consistently made on-
time payments every month. Your credit score matters because it may impact your interest rate,
term, and credit limit. The higher your credit score, the more you may be able to borrow and the
lower the interest rate you could receive.
For example, with a good or excellent credit score, you might qualify for a lower interest rate and
monthly payment. The example below shows how your monthly payment could vary on a loan of
$15,000 depending on your annual percentage rate (APR).
With excellent credit and an average APR of 5%, the monthly payment would be $352. While with
good credit and an average APR of 10%, the monthly payment would be $391. But with fair credit and
an average APR of 15%, the monthly payment would grow to $427. These rates are for illustrative
purposes only.
2. CAPACITY:
Every lender is different, but many mortgage lenders prefer an applicant’s DTI to be around 36% or
less before approving an application for new financing. It is worth noting that sometimes lenders are
prohibited from issuing loans to consumers with higher DTIs as well.
Capacity measures the borrower’s ability to repay a loan by comparing income against recurring
debts and assessing the borrower’s debt-to-income (DTI) ratio. Lenders calculate DTI by adding a
6. borrower’s total monthly debt payments and dividing that by the borrower’s gross monthly income.
The lower an applicant’s DTI, the better the chance of qualifying for a new loan
3. COLLATERAL:
This can help a borrower secure loans. It gives the lender the assurance that if the borrower defaults
on the loan, the lender can get something back by repossessing the collateral. The collateral is often
the object for which one is borrowing the money: Auto loans, for instance, are secured by cars, and
mortgages are secured by homes.
Collateral can also be defined as an asset that is pledged as security for a loan. It's a way for lenders
to minimize the risk of lending by having something they can seize and sell or rent to recover their
money in case the borrower defaults. It could be in different forms like stocks, bonds, property or
other assets.
Generally, the value of the collateral is sufficient to cover the lender’s loss in case of loan default.
When that’s not the case, the lender may sue the borrower to collect the remaining balance. On the
other hand, if you pay off the loan, the lender will remove their claim on your asset, meaning you’ll
now own that asset free and clear.
4. CAPITAL:
Capital is a broad term for anything that gives its owner value or advantage, like a factory and its
equipment, intellectual property like patients, or a company's or person's financial assets. Even
though money itself can be called capital, the word is usually used to describe money used to make
things or invest.
7. It represents the borrower's financial resources or assets that can be used as collateral or as a source
of repayment for the loan. Lenders consider the amount of capital the borrower has invested in the
business or project, as well as the value of any collateral offered to secure the loan. Capital is
anything that increases one’s ability to generate value. It can be used to increase value across a wide
range of categories which can be financial, social, physical, intellectual, etc.
TYPES OF CAPITAL:
I. Financial (Economic) Capital
Financial capital is necessary in order to get a business off the ground. This type of capital comes from two
sources: debt and equity. Debt capital refers to borrowed funds that must be repaid at a later date,
usually with interest.
Sources of financial capital include:
PROFIT.
LOANS AND BONDS.
CORPERATE STOCK.
II. HUMAN CAPITAL:
Is a much less tangible concept, but its contribution to a company's success is no less
important. Human capital refers to the skills, knowledge, experience, and abilities of individuals
8. that contribute to their productivity and earning potential. Investments in education, training,
and healthcare can also enhance human capital too.
Human capital affects economic performance on a national and global level and is essential in
the continuous development of valuable resources and societal advancement. Some examples
of human capital are:
LIFE EXPERIENCE.
EDUCATION.
STRENGTH.
TRAINING.
CREATIVITY.
PHYSICAL HEALTH ETC.
3. Social Capital
Social capital is an intangible asset, referring to the relationships people have with each
other, and the desire they have to do things for and with others within their social networks.
People tend to do things to help and encourage those in their same social network, creating a
cycle of mutually beneficial reciprocity.
Social capital is resources gained through interpersonal relationships and larger social networks.
It's the positive outcome of human interaction, including information, resources, innovation and
opportunities. This type of capital contributes to collective efforts to achieve shared goals,
purposes or overall success.
9. 5. CONDITIONS:
Conditions encompass the economic, industry-specific, and regulatory factors that may impact the
borrower’s ability to repay the loan. In addition to examining income, lenders look at the general
conditions relating to the loan. This may include the length of time that an applicant has been
employed at their current job, how their industry is performing, and future job stability.
Also based on the borrower’s creditworthiness and risk assessment, lenders determine the loans
terms and conditions, including the loan amount, interest rate, repayment schedule, loan duration
etc. Additionally, lenders may consider conditions outside of the borrower’s control, such as the
state of the economy, industry trends, or pending legislative changes.
HOW TO GET LOANS:
BEFORE TAKING OUT A LOAN DECIDE HOW MUCH YOU NEED TO BORROW
Related terms:
What is a personal loan?
10. A personal loan is a type of lump-sum financing borrowers can get from a traditional bank, credit union or
online lender, which they can use for a variety of expenses such as medical bills, auto repairs etc. Unlike
specific loans such as auto loans or mortgages, which are used for purchasing a car or a home, personal
loans can always be used for different purposes.
ADVANTAGES OF PERSONAL LOAN:
1. You can use personal loans for a lot of reasons.
2. Interest rate and monthly payment remain fixed.
3. The loan is not repayable on demand and so available for the term of the loan this could be between
three ten years unless you default.
4. Loans can be tied to the lifetime of the equipment or other asset you’re borrowing the money to pay
for.
5. Loan are flexible this means that personal loan companies really make you decide how you’ll use the
money ahead of time. This means the list of purposes for a personal loan can be said to be almost
endless, and you can apply for funding if you’re undecided on how you’ll use the cash.
11. DISADVANTAGES OF LOAN:
1. You have to repay the full amount of your loan even if you end up not needing it all.
2. Borrowers pay interest on the full loan amount.
3. In some cases, loans are secured against the assets of the business or personal possessions, example your home. The
interest rates for secured loans may be lower than for unsecured ones, but the assets or home could be at risks if you
cannot make the repayments.
4. There may be a charge if you want to repay the loan before the end of the loan term, particularly if the interest rate
is fixed.
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Conclusion:
It is not a good idea to take out a loan for ongoing expenses, as it may be difficult to keep up
repayments. Ongoing expenses are instead best funded from cash received from sales, possibly with an
overdraft as backup.
If you cannot obtain a loan or other type of finance from your bank, there are other finance options
available to you. For more information, see ARTLEY FINANCE (HK) LIMITED.
12. BROKER INQUIRIES ARE WELCOMED AND APPRECIATED: Our brokers receive 2% commission for
referral. We assist Clients and brokers in their attempt to secure funding by working on their funding
requests that may require innovative financing.
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