FINS1612 Lecture Notes - Lecture 7: Finance Lease, Subordinated Debt, Trade Credit
Document Summary
Overview of debt financing arrangements: short term debt. Inventory finance, accounts receivable, financing and factoring: mid-long term debt. Short-term assets should be funded with short-term liabilities. Long-term assets should be funded with long-term liabilities: short-term debt is a financing arrangement for a period of less than one year with (cid:448)arious (cid:272)hara(cid:272)teristi(cid:272)s to suit (cid:271)orro(cid:449)ers(cid:859) parti(cid:272)ular (cid:374)eeds. Timing of repayment, risk, interest rate structures (variable or fixed) and the source of funds. It sits in the current liabilities of the balance sheet. Term loan & fully drawn advances: term loan. A loan advanced for a specific period (three to 15 years), usually for a known purpose; e. g. purchasing land, premises, plant and equipment. Secured by mortgage over asset purchased or other assets of the firm: fully drawn advance, provided by: A term loan where the full amount is provided at the start of the loan.
