Chapter 17 Commercial Banking Lending

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Annual Percentage Rate
• Visit link on APR on moodle
• Find out other links on calculating APR
• We will go over math on Thursday
• This math will be the math for Test 4 Cash Conversion Cycle -From (3 definitions)
• A metric that expresses the length of time, in days, that takes for a company to convert resource inputs into cash flows
• The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers.
• This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties. -Commercial and industrial loans represent the earliest form of lending that banks varied out in their more than 2000 years of history -close to 1/5 of commercial bank loans loan portfolio is classified as business or C&I loan Short-Term Business Loans
• Self-Liquidating Inventory Loans- business loans, usually to support the purchase of inventories, in which the credit is gradually repaid by the borrowing customer as inventory is sold (60-90 days). o Usually related to the borrowers need for short term cash to finance purchases of inventory or cover production costs, the payment of taxes, interest payments on debt, and dividend payments to stock holders.
• Working Capital Loans- loans that provide business with short-term credit lasting from a few days to one year and that re often used to fund the purchase of inventories in order to put goods on shelves or to purchase raw materials. frequently working capital loan is designed to cover seasonal peaks in the business customer’s production levels and credit needs. These loans are secured by accounts rev and by pledges of inventory…...

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