May 25, 2024

Commercial credit  refers to all non-cash loans such as cash loans, letters of guarantee, counter-guarantees, suretyships, endorsements, endorsements and commitments with this quality, purchased bonds and similar capital market instruments by banks.

Commercial Loan Classification According to Definitions

Business loans are classified in several ways. one of them is classified based on the frequency with which the loan is repaid. Credits in this case:

  • spot loans and
  • It is divided into two as revolving loans.

 

Spot Loans

Spot loans are a type of commercial loan in which the interest rate determined when using the loan is not changed until the end of the maturity, interest, taxes and other deductions are paid at once, at the end of the maturity, in the agreed periods.

It is possible to pay the principal early in the loan application, but it will take place within the framework of the principles to be determined by the bank.

Revolving Loans

Revolving loans, on the other hand, are a type of loan in which the borrower makes continuous loan use or loan repayment, provided that the limit amount is not exceeded, and the limit changes constantly over time. This application basically has a similar feature to the credit card.

Loans made on the basis of maturity are classified as short-term, medium-term and long-term according to time.

Loans with a maturity of up to 12 months are short-term loans.

These are medium-term loans to loans with maturities between 12 and 24 months.

They are long-term loans to loans with a maturity of more than 24 months.

Commercial Loans by Collateral Basis

Another classification is collateral-based. Credits accordingly

  • Open loans (unsecured loans)
  • Secured loans
    • Loans against surety
    • Secured loans

Open Loans

These are the loans given in the form of current accounts owed to businesses with high credibility and without any risk concerns about their financial structure, without taking any collateral in return for open loans. In open loans, there is no guarantee other than the signature of the authorized person, only the general loan agreement is signed.

Secured Loans

Collateralized loans, known as double-signature loans in the banking literature, are made available against at least two signatures, including the customer and the guarantor or guarantors whose creditworthiness is trusted. It is based on stronger collateral than open loans.

Loans by Financial Collateral

These can be divided into several subgroups within themselves. It is stated below:

Cash Against Commercial Loans

In practice, it is the type of collateral that banks provide the most comfortable loan in return. The bank can make loans available by placing a block on the company’s deposits in the bank.

Commercial Loans Against Checks and Promissory Notes

They give as collateral for this loan requested by the companies in order to convert the checks or bills obtained from the forward sales of goods/services into cash. By applying a certain margin to checks and/or promissory notes, cash payments are made in a way that does not exceed a certain percentage of the collateral.

Commercial Loan Against Commodity

It is the use of credit in return for commodities that have favorable properties and do not show significant price fluctuations in short periods.

It is important for the security of the loan that the commodity in question meets certain conditions. Therefore, the following factors should be considered:

  • It should not break easily,
  • It should not lose value,
  • It should be suitable for storage,
  • It must be a commodity that is easily sought after,
  • It should not be stockpiled for a speculative purpose,
  • There should be no packaging defects,
  • It shouldn’t have been confiscated.
  • Must be the property of the pledger,

Loans against Real Estate Pledge

It is the most common type of collateral. In cases where the financial data of the companies cannot be obtained in a healthy way, the most reliable collateral is the loans obtained by pledging the real estate.

Loans for Machine Park

It is the type of loan that is used by taking the machines in the machinery park of a factory or by taking your machine as a pledge. The fact that the technology of the pledged machines is not obsolete within the loan term and is in a salable condition is important for the pledge of this machine.

A Classification on the Quality of Commercial Credit

After classification on the basis of collateral, a classification should be made on the nature of the loan. Accordingly, the commercial loan provided by a bank is basically:

  • cash loan
  • Non-cash loan

is divided into two.

Cash Loans

Cash loans are loans provided in the form of lending cash based on a certain maturity in return for interest or interest and commission.

Non-cash loans

In this type of commercial loan, there is no borrowing from any bank, that is, cash outflow. There is a case of giving a guarantee (a commitment to pay if the debt is not paid). No interest can be charged on non-cash loans, only commission is taken by banks. If non-cash loans are compensated (turned into cash), default interest is collected from the companies until the time of payment.

Non-cash loans are basically divided into three:

Letter of guarantee
: It is the bank’s commitment to the other party that a certain amount will be paid unconditionally in the case of the delivery of a good, the execution of a job or the payment of a debt on due date, etc.

Letter
of Credit : It is the guarantee given by the bank where the importer works to the exporter for a product that a company wants to buy from abroad.

Aval acceptance credits
Sometimes the exporter may send a policy along with the document. When this policy is signed by the bank, it means that the bank has given a bill in favor of the importer.

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