B Com Exam > B Com Notes > Accountancy and Financial Management > Loan Financing - Sources of Finance, Accountancy and Financial Management
Loan Financing - Sources of Finance, Accountancy and Financial Management | Accountancy and Financial Management - B Com PDF Download
Loan Financing
Loan financing is the important mode of finance raised by the company. Loan finance may be divided into two types:
(a) Long-Term Sources
(b) Short-Term Sources
Loan finance can be raised through the following important institutions
Financial Institutions
With the effect of the industrial revaluation, the government established nation wide and state wise financial industries to provide long-term financial assistance to industrial concerns in the country. Financial institutions play a key role in the field of industrial development and they are meeting the financial requirements of the business concern. IFCI, ICICI, IDBI, SFC, EXIM Bank, ECGC are the famous financial institutions in the country.
Commercial Banks
Commercial Banks normally provide short-term finance which is repayable within a year. The major finance of commercial banks is as follows:
Short-term advance: Commercial banks provide advance to their customers with or without securities. It is one of the most common and widely used short-term sources of finance, which are needed to meet the working capital requirement of the company. It is a cheap source of finance, which is in the form of pledge, mortgage, hypothecation and bills discounted and rediscounted.
Short-term Loans Commercial banks also provide loans to the business concern to meet the short-term financial requirements. When a bank makes an advance in lump sum against some security it is termed as loan. Loan may be in the following form:
(a) Cash credit: A cash credit is an arrangement by which a bank allows his customer to borrow money up to certain limit against the security of the commodity.
(b) Overdraft: Overdraft is an arrangement with a bank by which a current account holder is allowed to withdraw more than the balance to his credit up to a certain limit without any securities.
Development Banks
Development banks were established mainly for the purpose of promotion and development the industrial sector in the country. Presently, large number of development banks are functioning with multidimensional activities. Development banks are also called as financial institutions or statutory financial institutions or statutory non-banking institutions. Development banks provide two important types of finance:
(a) Direct Finance
(b) Indirect Finance/Refinance
Presently the commercial banks are providing all kinds of financial services including development-banking services. And also nowadays development banks and specialisted financial institutions are providing all kinds of financial services including commercial banking services. Diversified and global financial services are unavoidable to the present day economics. Hence, we can classify the financial institutions only by the structure and set up and not by the services provided by them.
The document Loan Financing - Sources of Finance, Accountancy and Financial Management | Accountancy and Financial Management - B Com is a part of the B Com Course Accountancy and Financial Management.
All you need of B Com at this link: B Com
|
44 videos|75 docs|18 tests
|
FAQs on Loan Financing - Sources of Finance, Accountancy and Financial Management - Accountancy and Financial Management - B Com
| 1. What are the different sources of finance for loan financing? |  |
Ans. The different sources of finance for loan financing include:
1. Bank Loans: Banks provide loans to individuals and businesses based on their creditworthiness and ability to repay the loan.
2. Financial Institutions: Non-banking financial institutions also offer loan financing options to individuals and businesses.
3. Peer-to-Peer Lending: This is a relatively new source of finance where individuals can borrow money directly from other individuals through online platforms.
4. Trade Credit: Suppliers may offer credit terms to businesses, allowing them to purchase goods or services on credit and pay later.
5. Government Programs: Governments often provide loan programs to support specific sectors or industries, such as small businesses or agriculture.
| 2. What is the role of accountancy in loan financing? | |
Ans. Accountancy plays a crucial role in loan financing by:
1. Financial Analysis: Accountants analyze the financial health of individuals or businesses seeking loans, assessing their creditworthiness and ability to repay the loan.
2. Loan Documentation: Accountants prepare and maintain the necessary financial documents, such as balance sheets, income statements, and cash flow statements, which are required for loan applications.
3. Loan Repayment Tracking: Accountants track loan repayments, ensuring that borrowers make timely payments and adhere to the agreed-upon terms.
4. Financial Reporting: Accountants provide regular financial reports to lenders, giving them insights into the borrower's financial performance and ability to meet loan obligations.
5. Risk Management: Accountants assess the financial risks associated with loan financing, helping lenders determine appropriate interest rates, loan terms, and collateral requirements.
| 3. What is the role of financial management in loan financing? | |
Ans. Financial management plays a crucial role in loan financing by:
1. Loan Acquisition: Financial managers determine the optimal financing options for individuals or businesses, considering factors such as interest rates, repayment terms, and collateral requirements.
2. Financial Planning: Financial managers develop comprehensive financial plans that include loan repayment schedules, budgeting, and forecasting to ensure that borrowers can meet their loan obligations.
3. Cash Flow Management: Financial managers monitor cash flows to ensure that borrowers have sufficient funds to meet their loan repayments and other financial obligations.
4. Risk Assessment: Financial managers assess the risks associated with loan financing, such as interest rate fluctuations or changes in the borrower's financial circumstances, and implement risk mitigation strategies.
5. Financial Decision-making: Financial managers make informed decisions regarding loan financing, considering factors such as the cost of capital, return on investment, and the overall financial health of the borrower.
| 4. How do banks determine the eligibility for loan financing? | |
Ans. Banks determine the eligibility for loan financing by considering several factors, including:
1. Credit Score: Banks assess the borrower's creditworthiness by evaluating their credit score, which is based on their past borrowing and repayment history.
2. Income and Employment Stability: Banks consider the borrower's income level and stability of employment to ensure that they have a reliable source of income to repay the loan.
3. Debt-to-Income Ratio: Banks analyze the borrower's debt-to-income ratio, which compares their monthly debt payments to their monthly income, to assess their ability to handle additional loan repayments.
4. Collateral: Banks may require borrowers to provide collateral, such as property or assets, which can be seized by the bank in case of loan default.
5. Loan Purpose: Banks also consider the purpose of the loan and evaluate its potential for generating income or fulfilling a specific need.
| 5. What are the advantages of peer-to-peer lending for loan financing? | |
Ans. Peer-to-peer lending offers several advantages for loan financing, including:
1. Lower Interest Rates: Peer-to-peer lending platforms often offer competitive interest rates compared to traditional financial institutions, making it an attractive option for borrowers.
2. Ease of Application: Applying for a loan through a peer-to-peer lending platform is often simpler and faster than going through traditional banking channels, as the process is streamlined and conducted online.
3. Diverse Borrower Profiles: Peer-to-peer lending platforms cater to a wide range of borrowers, including those with less-than-perfect credit scores or limited credit history, providing them with access to loan financing that may not be available through traditional sources.
4. Flexible Loan Terms: Borrowers can negotiate loan terms directly with individual lenders on peer-to-peer lending platforms, allowing for greater flexibility in repayment schedules and loan amounts.
5. Potential for Higher Returns: On the lender side, peer-to-peer lending offers the opportunity to earn higher returns compared to traditional savings or investment accounts, as lenders receive interest payments from borrowers.
Related Exams
About this Document
|
1.6K Views |
|
4.85/5 Rating |
|
Dec 23, 2024 Last updated |
Document Description: Loan Financing - Sources of Finance, Accountancy and Financial Management for B Com 2024 is part of Accountancy and Financial Management preparation.
The notes and questions for Loan Financing - Sources of Finance, Accountancy and Financial Management have been prepared according to the B Com exam syllabus. Information about Loan Financing - Sources of Finance, Accountancy and Financial Management covers topics
like and Loan Financing - Sources of Finance, Accountancy and Financial Management Example, for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Loan Financing - Sources of Finance, Accountancy and Financial Management.
Introduction of Loan Financing - Sources of Finance, Accountancy and Financial Management in English is available as part of our Accountancy and Financial Management
for B Com & Loan Financing - Sources of Finance, Accountancy and Financial Management in Hindi for Accountancy and Financial Management course.
Download more important topics related with notes, lectures and mock test series for B Com
Exam by signing up for free. B Com: Loan Financing - Sources of Finance, Accountancy and Financial Management | Accountancy and Financial Management - B Com
Description
Full syllabus notes, lecture & questions for Loan Financing - Sources of Finance, Accountancy and Financial Management | Accountancy and Financial Management - B Com - B Com | Plus excerises question with solution to help you revise complete syllabus for Accountancy and Financial Management | Best notes, free PDF download
Information about Loan Financing - Sources of Finance, Accountancy and Financial Management
In this doc you can find the meaning of Loan Financing - Sources of Finance, Accountancy and Financial Management defined & explained in the simplest way possible. Besides explaining types of
Loan Financing - Sources of Finance, Accountancy and Financial Management theory, EduRev gives you an ample number of questions to practice Loan Financing - Sources of Finance, Accountancy and Financial Management tests, examples and also practice B Com
tests
|
44 videos|75 docs|18 tests
|
Download as PDF
|
Explore Courses for B Com exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
Related Searches
Extra Questions
,video lectures
,shortcuts and tricks
,Objective type Questions
,MCQs
,ppt
,Previous Year Questions with Solutions
,Accountancy and Financial Management | Accountancy and Financial Management - B Com
,Summary
,Accountancy and Financial Management | Accountancy and Financial Management - B Com
,Sample Paper
,Loan Financing - Sources of Finance
,Accountancy and Financial Management | Accountancy and Financial Management - B Com
,Viva Questions
,practice quizzes
,Loan Financing - Sources of Finance
,mock tests for examination
,study material
,Exam
,Important questions
,Semester Notes
,past year papers
,Loan Financing - Sources of Finance
,Free
;
Additional Information about Loan Financing - Sources of Finance, Accountancy and Financial Management for B Com Preparation
Loan Financing - Sources of Finance, Accountancy and Financial Management Free PDF Download
The Loan Financing - Sources of Finance, Accountancy and Financial Management is an invaluable resource that delves deep into the core of the B Com exam.
These study notes are curated by experts and cover all the essential topics and concepts, making your preparation more efficient and effective.
With the help of these notes, you can grasp complex subjects quickly, revise important points easily,
and reinforce your understanding of key concepts. The study notes are presented in a concise and easy-to-understand manner,
allowing you to optimize your learning process. Whether you're looking for best-recommended books, sample papers, study material,
or toppers' notes, this PDF has got you covered. Download the Loan Financing - Sources of Finance, Accountancy and Financial Management now and kickstart your journey towards success in the B Com exam.
Importance of Loan Financing - Sources of Finance, Accountancy and Financial Management
The importance of Loan Financing - Sources of Finance, Accountancy and Financial Management cannot be overstated, especially for B Com aspirants.
This document holds the key to success in the B Com exam.
It offers a detailed understanding of the concept, providing invaluable insights into the topic.
By knowing the concepts well in advance, students can plan their preparation effectively.
Utilize this indispensable guide for a well-rounded preparation and achieve your desired results.
Loan Financing - Sources of Finance, Accountancy and Financial Management Notes
Loan Financing - Sources of Finance, Accountancy and Financial Management Notes offer in-depth insights into the specific topic to help you master it with ease.
This comprehensive document covers all aspects related to Loan Financing - Sources of Finance, Accountancy and Financial Management.
It includes detailed information about the exam syllabus, recommended books, and study materials for a well-rounded preparation.
Practice papers and question papers enable you to assess your progress effectively.
Additionally, the paper analysis provides valuable tips for tackling the exam strategically.
Access to Toppers' notes gives you an edge in understanding complex concepts.
Whether you're a beginner or aiming for advanced proficiency, Loan Financing - Sources of Finance, Accountancy and Financial Management Notes on EduRev are your ultimate resource for success.
Loan Financing - Sources of Finance, Accountancy and Financial Management B Com Questions
The "Loan Financing - Sources of Finance, Accountancy and Financial Management B Com Questions" guide is a valuable resource for all aspiring students preparing for the
B Com exam. It focuses on providing a wide range of practice questions to help students gauge
their understanding of the exam topics. These questions cover the entire syllabus, ensuring comprehensive preparation.
The guide includes previous years' question papers for students to familiarize themselves with the exam's format and difficulty level.
Additionally, it offers subject-specific question banks, allowing students to focus on weak areas and improve their performance.
Study Loan Financing - Sources of Finance, Accountancy and Financial Management on the App
Students of B Com can study Loan Financing - Sources of Finance, Accountancy and Financial Management alongwith tests & analysis from the EduRev app,
which will help them while preparing for their exam. Apart from the Loan Financing - Sources of Finance, Accountancy and Financial Management,
students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc.
The EduRev App will make your learning easier as you can access it from anywhere you want.
The content of Loan Financing - Sources of Finance, Accountancy and Financial Management is prepared as per the latest B Com syllabus.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup