Types and sources of credit

• Credit ??

  Legal agreement between borrower and lender for money
• Types of credit??

  -Loans

  -overdrafts

  -Trade credit
• Loans??

  Set amount of money due to be paid back over a set amount of time with interest.
• Benefit of Loans NO1

  Quick and easy to secure
• Benefit of Loans NO2

  Fixed interest rates allow firms to budget
• Benefit of Loans NO3

  Improved Cashflow
• The longer term of a loan, the lower monthly payments will be.
• Drawbacks of Loans NO1

  Interest must be paid regardless of financial performance
• Drawbacks of loans NO2

  More expensive that other forms of finanance
• Drawbacks of Loans NO3

  Rejection of loan if firm is perceived as high risk due to past debt