HomeFWJ TakeawayWhat are the different types of bank loans?

Whatever you loan requirements may be, we can provide you with sound legal advice to ensure that you enter into the loan which best suits you. Getting tied in to an inappropriate business loan agreement can have very bad consequences for a business and can be very hard to get out of.

Below is a list of some of the business loans our team regularly advises on.

  • bilateral loans – this is a simple type of business loan between two parties;
  • syndicated loans – this involves a group of lenders (the syndicate) providing a loan to another party;
  • term loan – this a business loan agreement which has a fixed repayment schedule. The business loan could either be repaid in instalments or in full at the end of the term of the loan. Generally, these are used for longer term funding of development projects, e.g. to pay for an extension to a factory;
  • revolving facility – this type of business loan affords greater flexibility than a term loan in relation to methods of repayment. The borrower usually pays a commitment fee to the lender to allow it to keep drawing on the monies (up to an agreed limit) over a period of time. This is similar to a line of credit and can be used for fluctuating or unexpected expenses, e.g. emergency repairs;
  • factoring – this is a cash flow funding arrangement under which the factor takes a legal assignment of current and future book debts owing to the company in return for monetary pre-payments;
  • invoice discounting – this is essentially factoring but on a confidential basis. Unlike factoring, the company keeps the duty of collecting the debts and administering the sales ledger. Customers of the company are unaware of the finance facility the company has in place with the invoice discounter;
  • cash flow loans – a business loan agreement under which the lender provides funds using expected cash flows that the borrower can generate as collateral for the loan. This is a short term funding option;
  • trade finance loans – these business loans are typically revolving credit facilities which enable a business to finance its trade gap between the time it is required to pay for goods which it has purchased and the time when the business receives the funds from selling those goods. To draw-down this type of business loan the borrower consigns its draw-down documentation which usually includes the purchase invoice and transport documents to the lender as security for the business loan. This type of financing is often used by manufacturers, wholesalers and where goods are being imported from abroad.

At Francis Wilks & Jones we have a dedicated team of banking lawyers who specialise in acting for both borrowers and lenders. Our advice is fast and effective. Contact one of our team of banking lawyers now for your initial consultation. Whatever your banking needs, we are the experts to help you. Call us now. Let us help.

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