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Term loan

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Definition of Term loan

Term Loan Image 1

Term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between
one and ten years and requires a specified repayment schedule.


Term Loan

A secured loan made to business concerns for a specific period (normally three to ten years). It is repaid with interest, usually with periodical payments.



Related Terms:

Bridge Loan

A short term loan to cover the immediate cash requirements until permanent financing is received.


Bullet loan

A bank term loan that calls for no amortization.


Eurocredits

Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and
government borrowers.


Inventory loan

A secured short-term loan to purchase inventory. The three basic forms are a blanket
inventory lien, a trust receipt, and field warehousing financing.



Repurchase agreement

An agreement with a commitment by the seller (dealer) to buy a security back from
the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a
collateralized short-term loan, where the collateral may be a Treasury security, money market instrument,
federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is
reported as a reverse Repo.


Rollover

Most term loans in the Euromarket are made on a rollover basis, which means that the loan is
periodically repriced at an agreed spread over the appropriate, currently prevailing LIBO rate.


Term Loan Image 2

World Bank

The International Bank for Reconstruction and Development, an international organization that provides long-term loans to developing countries to improve their infrastructure.


Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.


Broker loan rate

Related: Call money rate.


Builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).


Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.


coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model


Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.


Credit Terms

Conditions under which credit is extended by a lender to a borrower.


Dealer loan

Overnight, collateralized loan made to a dealer financing his position by borrowing from a
money market bank.


Term Loan Image 3

Demand Loan

A loan which must be repaid in full on demand.


Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models



Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.


Equivalent loan

Given the after-tax stream associated with a lease, the maximum amount of conventional
debt that the same period-by-period after-tax debt service stream is capable of supporting.


Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.


Farm Improvement and Marketing Cooperatives Loans Act

See here


Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
Federal Home loan Banks play a role analogous to that played by the Federal Reserve Banks vis-à-vis
member commercial banks.


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.


financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.


Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.


Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.


Term Loan Image 4

Fixed-rate loan

A loan on which the rate paid by the borrower is fixed for the life of the loan.



Fixed Rate Loan

loan for a fixed period of time with a fixed interest rate for the life of the loan.


Flexible Term

Optional periods of time which the conditions of a contract will be carried out.


Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.


Intercompany loan

loan made by one unit of a corporation to another unit of the same corporation.


Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.


Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.


Intermediary

An independent third party that may act as a mediator during negotiations.


Intermediate Good

A good used in producing another good.


Intermediate-term

Typically 1-10 years.


Intermediation

Investment through a financial institution. Related: disintermediation.


Jumbo loan

loans of $1 billion or more. Or, loans that exceed the statutory size limit eligible for purchase or
securitization by the federal agencies.


Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a
liquidity premium.


Loan amortization schedule

The schedule for repaying the interest and principal on a loan.


Loan Capital

Borrowed funds having a fixed interest rate.


Loan Covenants

Express stipulations included in loan agreements that are designed to monitor
corporate performance and restrict corporate acts, affording added protection to the lender.


Loan syndication

Group of banks sharing a loan. See: syndicate.


Loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate
specified in the policy.


Loans payable

Amounts that have been loaned to the company and that it still owes.


Long-term

In accounting information, one year or greater.


Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.


Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.


Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.


Long Term Debt

Liability due in a year or more.


Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the
capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and
common stockholder equity.


Long-term debt ratio

The ratio of long-term debt to total capitalization.


Long-term debt to equity ratio

A capitalization ratio comparing long-term debt to shareholders' equity.


Long-term financial plan

Financial plan covering two or more years of future operations.


Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.


LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.


Long-term liabilities

Amounts owing after more than one year.


Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.


Multicurrency loans

Give the borrower the possibility of drawing a loan in different currencies.


Multifamily loans

loans usually represented by conventional mortgages on multi-family rental apartments.


Negative Loan Covenants

loan covenants designed to limit a corporate borrower's behavior
in favor of the lender.


Operating Loan

A loan advanced under an operating line of credit.


Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.


Parallel loan

A process whereby two companies in different countries borrow each other's currency for a
specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing
foreign exchange risk. Also referred to as back-to-back loans.


personal loan

A lump sum that you borrow from a financial institution for a specified period of time. To repay the loan, you pay interest on the entire lump sum, and make payments on a scheduled basis.


Positive Loan Covenants

loan covenants expressing minimum and maximum financial measures
that must be met by a borrower.


predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate


Project loan certificate (PLC)

A primary program of Ginnie Mae for securitizing FHA-insured and coinsured
multifamily, hospital, and nursing home loans.


Project loan securities

Securities backed by a variety of FHA-insured loan types - primarily multi-family
apartment buildings, hospitals, and nursing homes.


Project loans

Usually FHA-insured and HUD-guaranteed mortgages on multiple-family housing complexes,
nursing homes, hospitals, and other development types.


Repayment Terms

The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.


Savings and Loan association

National- or state-chartered institution that accepts savings deposits and
invests the bulk of the funds thus received in mortgages.


secured loan or line of credit

A lump sum of funds (loan), or a revolving source of credit with a pre-established limit (line of credit), for which the customer must provide collateral.


Self-liquidating loan

loan to finance current assets, The sale of the current assets provides the cash to repay
the loan.


Short-term financial plan

A financial plan that covers the coming fiscal year.


Short-term investment services

Services that assist firms in making short-term investments.


Short-term solvency ratios

Ratios used to judge the adequacy of liquid assets for meeting short-term
obligations as they come due, including
1) the current ratio,
2) the acid-test ratio,
3) the inventory turnover ratio, and
4) the accounts receivable turnover ratio.


Short-term tax exempts

Short-term securities issued by states, municipalities, local housing agencies, and
urban renewal agencies.


Term

See term to maturity.


Term

This is usually the duration of a loan.


term

The period of time during which a financial contract – such as a GIC or a loan – is in force.


Term

The time period during which a policy is in force, or the time it takes for a policy to reach maturity.


Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: serial bonds


Term Deposit

An interest-earning bank deposit that cannot be withdrawn without penalty until a specific time.


Term Fed Funds

Fed Funds sold for a period of time longer than overnight.


Term insurance

Provides a death benefit only, no build-up of cash value.


Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.


Term life insurance

A contract that provides a death benefit but no cash build-up or investment component.
The premium remains constant only for a specified term of years, and the policy is usually renewable at the
end of each term.


Term Life Insurance

A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.


Term premiums

Excess of the yields to maturity on long-term bonds over those of short-term bonds.


Term repo

A repurchase agreement with a term of more than one day.
term structure of interest rates
Relationship between interest rates on bonds of different maturities usually
depicted in the form of a graph often depicted as a yield curve. Harvey shows that inverted term structures
(long rates below short rates) have preceded every recession over the past 30 years.


Term Sheet

A list of the major points of the proposed financing being offered by an investor.


Term structure

The relationship between the yields on fixed-interest
securities and their maturity dates. Expectation of changes in interest rates
affects term structure, as do liquidity preferences and hedging pressure. A
yield curve is one representation in the term structure.


Term Structure of Interest Rates

Relationship among interest rates on bonds with different terms to maturity.


Term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed. See: Maturity.


Term to Maturity

Period of time from the present to the redemption date of a bond.


Term trust

A closed-end fund that has a fixed termination or maturity date.



 

 

 

 

 

 

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