Lending

Lending

This subtopic gives an introduction on the subject of lending to corporate lawyers.

Types of loans

The need for borrowing money may arise as part of any transaction involving an individual or a company, eg a company may borrow for working capital purposes or to fund an acquisition while an individual may borrow to start up a business.

The purpose for which money is being borrowed and the nature of the lender will determine the type of loan entered into:

•
an overdraft (sometimes referred to as a working capital facility) is an uncommitted facility repayable on demand, commonly used to meet temporary shortfalls in working capital
•
a term loan is a committed facility provided over a specified period, repayable at or by the end of the specified period usually on the basis of a predetermined schedule. The loan will be available for a short period of time after the agreement between the borrower and lender has been signed and may be available to drawdown in tranches (with each tranche having its own availability period)
•
a revolving facility is similar to a term loan but provides more flexibility

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