Professional Documents
Culture Documents
Business Loans
McGraw-Hill/Irwin
17-2
Key Topics
Types of Business Loans: Short-Term and
Long-Term
Analyzing Business Loan Requests
Collateral and Contingent Liabilities
Sources and Uses of Business Funds
Pricing Business Loans
Customer Profitability Analysis (CPA)
McGraw-Hill/Irwin
Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Operating Efficiency
Annual Costs of Goods Sold/Average
Inventory
Average Receivables Collection
Period
Net Sales/Net Fixed Assets
Net Sales/Total Assets
Net Sales/Accounts Receivables
McGraw-Hill/Irwin
Bank Management and Financial
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Bank Management and Financial
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Coverage Measures
Interest Coverage
Coverage of Interest and Principal
Payments
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Bank Management and Financial
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Liquidity Measures
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Bank Management and Financial
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Profitability Measures
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Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Comprehensive Environmental
Response, Compensation and
Liability Act
This Law Makes Current and Past Owners of
Contaminated Property, Current and Past
Owners and Prior Operators of Businesses
Located on Contaminated Property and
Those Who Transport Hazardous
Substances Potentially Liable
McGraw-Hill/Irwin
Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Bank Management and Financial
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Prime Rate
Major Banks Established a Base Lending
Fee During the Great Depression. At that
Time It Was the Lowest Interest Rate
Charged Their Most Credit Worthy
Customers for Short-Term Working Capital
Loans
McGraw-Hill/Irwin
Bank Management and Financial
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LIBOR
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Quick Quiz
What aspects of a business firms financial
statements do loan officers and credit analysts
examine carefully?
What methods are used to price business loans?
Suppose a bank estimates that the marginal cost
of raising loanable funds to make a $10m loan to
one of its corporate customers is 4%, its nonfunds
operating costs to evaluate and offer this loan are
0.5%, the default-risk premium on the loan is
0.375%, a term-risk premium of 0.625% is to be
added, and the desired profit margin is 0.25%.
What loan rate should be quoted this borrower?
How much interest will this borrower pay in a
year?
McGraw-Hill/Irwin
Bank Management and Financial