SUMMARY
Term loans and leases are an important source of intermediate and long-term financing. Term loans are distinctive: insofar as they have a fixed maturity; they are directly negotiated with the lender; they need collateral; and they have a repayment schedule. Debt maturity can easily be matched with the maturity of the assets. However, restrictive covenants are often derogatory.
The amortisation schedule may be of two kinds. In one, the amount of instalment declines over time as the interest is charged on the remaining balance of the principal. In the other, the amount of the instalment remains the same throughout.
Leasing provides an alternative to buying an asset, it can, therefore, be considered a source of financing. The financial ...
Get Fundamentals of Financial Management, Third Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
