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The concept of working capital loan, denominated loan and credit account loan.

What is a working capital loan and how does it work.

What is a working capital loan and how does it work.

There are many loans that are granted on different conditions and for different purposes. Such loans include working capital loan, denominated loan and social loan. Let’s start with a working capital loan. This is one of the bank loans that is taken to finance the current operations of the enterprise. Such money can be useful, inter alia, for payments to employees, or help in the purchase of some office equipment.

The company can maintain its financial liquidity thanks to revolving loans. It allows you to settle your current liabilities even if you have no cash on hand. Working capital loan is usually granted for up to a year, which makes it one of the short-term loans. If it is to be a seasonal inventory loan, it is granted for a longer period of time. Such a loan can be made available in a credit account as well as in a current account. There is no schedule for working capital loan payments, but it is implemented according to the limit set by the borrower. The same is true when paying off such a loan. There is no schedule for this. Usually, the bank wants the loan to be repaid until the loan is due. In some cases, the bank distributes the loan into installments, say repaid every month.

Denominated loan – concept and methods of operation.

Denominated loan - concept and methods of operation.

Another loan is a denominated loan. This is one of the foreign currency loans in which the debt in a foreign currency is calculated on the basis of the currency buying rate on the day when the loan agreement is signed. The exchange rate is constantly changing, which means that loans denominated are at risk. It may happen that the loan amount we applied for in the national currency will be lower in the foreign currency and thus we will receive less money than we needed to finance the investment. The opposite can also be the case. We may receive more money in a foreign currency than we requested in the national currency.

The concept and forms of credit in credit accounts.

The concept and forms of credit in credit accounts.

A loan in a credit account is a loan that requires the borrower to set up a separate credit account. All orders and transfers are made on this account, which is the opposite of overdraft facilities. Credit account loans are usually granted for a short period of time and for a medium term. Due to the fact that a separate loan account is kept, it is much easier to manage and monitor the loan. For the bank, it is much easier to control the borrower.

Credit account loans can be granted in several different forms. It can be granted as a target loan, loan for liabilities, as a cash loan, as a seasonal loan and as a credit line. Each of these forms can be a loan in a credit account, which is convenient for both the bank and the borrower.

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