Costs of Lending - Term Paper Example

? COSTS OF LENDING and Costs of Lending Introduction In the world one can not live without loans, therefore the institutions that provide lending services to the borrowers are of exceptional importance in that they help in growth and development of industrialization in the world. For this reason the commercial money lenders should pay attention to customers who are the person in need of cash so that they can fulfill their mutual requirements. Therefore due to the importance the organizations there should be measures put forward in order to reduce the costs of lending that are associated with money matters. Money can be made in profit if the measures employed in ensuring that the payment of money are clear so that money can compensate and be relent again. Costs are undergone and lending money this because if the money is not paid the agency undergo major costs if were enough collateral repay the cash A cost of lending is a thought that should be put under consideration when one is undertaking any money lending transaction. For this reason the costs of lending are the real consequences that are faced by the commercial institutions during and after lending money to organizations or individuals (Leila 2011). There are several hard ships and expenses that are undergone during the process of lending money. This might involve the bank into ending into very dangerous bad debts which will make the bank work at a loss which is highly dangerous for any commercial institution. Commercial and Corporate Lending As to my research commercial lending is the process by which money is lent to an established organization as credit so that the operations taking place in the organization can proceed (Lance 2002). This money is lent to the business entity so as to give a hand in the operational expenses in the organization and also other forms of capitals required in the organization (Lance 2002). For this reason during this transaction the commercial institution will focus more on ensuring that the organization has good and efficient flow of cash and secondly the assets that in most cases are the collateral to the commercial institution (Lance 2002). Therefore this is very different from loans in the manner that when loans are secured from a commercial institution the first thing that they feature is attaining collateral from the party who requires the loan. Under my opinion corporate lending is just identical to getting a personal loan it is only that the money transaction will not take place between the bank and the person but it is normally made from the bank to a company. This lending is usually used with the involvement of the asset, structured finance or through the help of the cash flow (Kaplan 2008). For this reason this risk of one attaining a non payable amount of cash is discouraged because the person who requires the loan will receive a share that is directly proportional to the assets owned by the individual or company. Commercial Lenders Commercial lenders are the financial institutions that lend money to organizations and individuals with hard collateral being put in place as security to the loan (Kaplan 2008). These lenders include commercial banks, private lending institutions, hard money lenders and also financial groups that have enough amounts that can be used to lend. They have their own policies each that govern the transactions involving money so that they can evaluate the persons who are capable of getting their loans (Kaplan 2008). The commercial lenders are extremely attractive and one can access them through brokers who direct them to the money lenders. The brokers earn from looking for customers which is solely catered for by the customer or the borrower. Importance of Commercial Lenders The commercial lenders give the organizations and other individual who require cash in order to build and uplift the living conditions of the countries and the societies where they live. This will lead to growth and expansion of the country and the societies leading to a harmonious and extremely peaceful society (David 2013). This will enable free circulation of finances leading to better and improvement in the currency of the country. For this case the commercial lenders institutions should be extremely well formulated and with enhanced channels so that they can gain trust and confidence from the esteemed customers. This will improve the lenders to lend cash freely leading to growth and expansion of organizations and free circulation of cash within the organizations (David 2013). This will help in contributing in the operational costs within the organizations leading to better and growth of the organizations. In the organization the operational expenses will be made available and improving on the status of the organization leading to better realization of the aims and objectives of the organization. This will enable improvement in the power of the currency of the nation leading to improved money exchange policies in the nation. For this reason the money lending will improve the task force of the people in the nation leading to improvement in the industrialization sector. This will improve the technology of the nation and significant innovations that will help in securing the major sectors of the nation (Charles 2009). But no matter how helpful the commercial lenders can be than the way they need to improve on the disaster management of the costs of lending which are very lethal to the commercial institutions. Therefore in order to uplift and keep on every person who is lent the money to work so that one can get profit and repay the loan within a specified duration of time. Costs of Lending In my opinion the costs of lending are of value when put under consideration because they might bring either profit or loss into the organization. As a result the organization must ensure it formulates policies that will govern the organization leading to the betterment of the organization and also favor the person requiring the loan (Charles 2009). I would recommend this can be enhanced through better evaluation of the borrowers so that one the agency can know whether the individual is capable of paying the amount or not. Therefore the agency should employ measures that will help in curving scrumptious ways of getting money and not paying. For this reason the commercial lenders should ensure that they apply the following measures in their daily practice (Charles 2009). They must first validate on the quality of collateral that is to be issued so as to repay the cash if the individual or the company is unable to repay the money. In the course of study i found that therefore the quality of the collateral that is to be used in lending the money must be of the required quality so that the repayment of money can be processed as fast as possible (Anthony 2011). This will enhance that payment of the loan leading to better services to other customers who require money for other issues. The amount lent to the individual or the company or organization should be repayable if the collateral that is issued by the borrower is adequately of the best quality. For that case the commercial center stake the obligation make sure that the collateral is put forward repay the money the required quality reduces the risk the commercial agency going loss if the customers unable repay the borrowed cash. The second measure that i found that should be put in place is to ensure equity between the person who is borrowing and the agency itself. This can be enhanced through better ways that will improve on the rates of repayment of the loan whereby the agency will ensure it has the required repay rate that will not discriminate the customer. Therefore equity will enable the persons to acquire cash that will enable them to proceed with their plans and enhanced repayment system will enable the person to pay the amount without difficulties (Anthony 2011). The collateral should not be specifically things that will benefit the agency by selling the collateral at a higher price but it should help the organization to have the security of their money and have a good running agency. In my opinion this also give the persons served the agency have more confidence the agency hence this ensures that everything organizations course (Wilmer 2010). Therefore this helps customers of the agencies to have more cash to keep the operational expenses that they require on a course which is the flow that leads to achievements of more and more profits for the organization. The type of collateral is also an issue in this faculty. This applies in that the collateral that is being put forward as a security to the cash should be of new technology so that Incase the money is not repay one can be able to sell the collateral easily without difficulties so as to repay the money (Anthony 2011). Therefore the type of collateral is highly valuable for the case of lending money. The collateral must be a good that is not perishable so that it can not expire between the time of the money lending and the time of repaying the money. Therefore in the assessment of the collateral one must ensure that the collateral good is of the desired type so that it can help the agency in case the money is not repaid within the specified duration of time. The commercial lenders are preferably important in organizations and to individuals because the loans in this area are truly fast in procession leading to better and efficiency in the transfer of funds for operations in the organizations (Adam 2011). For this case the agencies help a lot in ensuring that the organizations task force is maintained without lack where by this is better than application of a bank loan which takes a lot of time to be processed. There are main costs that should be minimized by the agencies and others should be minimized by customers who are seeking for the loan (Susan 2009). Therefore the agencies must lay down not get any difficulties when it comes to repayment of the loan. Therefore the agencies must therefore be lenient with customers in that they will try and be fair to them in order to maintain them and keep the customers needs more than the repayment of the money (Adam 2011). That is why collateral is not as a big deal to the agencies but availability of money to the organization to ensure that operations within the organization are taking place in order to get more and more money that can sustain the debt and receive some profit. The customers must try and look for agencies that have better policies which they can achieve so that the debt can be repaid within the guidelines of the agency (Lewis 2011). Therefore the customers should take a lot of caution when selecting satisfies their needs. The costs of lending are positive and also negative in other ways as the research shows. The persons who are lent the money can lose and this is a fabulous challenge to the agency because this becomes a real loss because that money is lost (Adam 2011). For this matter the i would advice the agency to follow up the customers well so that they can get the real information of customers before they make any transaction with him / her. Therefore before release of the money the agency must have a real evidence to support their release and more so e followed in order to complete the repayment of the money. The advice i would give to the customers is that they should look for agencies that are registered so that they can get the assurance that the agency reigns but it is not a camp of cone men (Adam 2011). This will help organizations and private entities to grow leading to better industrialization and growth in the country. Conclusion In the corporate and commercial lending are highly significant and valuable in any country. This is because they help in growth and expansion of the country in different areas. It will help the innovation sector leading to better methods of working out things. This will be enhanced when technology is improved by the government together with the private non governmental organizations. These will enhance the country's growth through the creation of more jobs and improvement of the life standards in the societies. Therefore this helps customers of the agencies to have more cash to keep the operational expenses that they require on a course which is the flow that leads to achievements of more and more profits for the organization. This is for organization and this will lead to expansion of the organization leading to better and enhanced services to the customers of the organization and betterment of the organizational goals and aims. Therefore the organizations are particularly significant and they lead to growth which is particularly valuable so as to realize the dreams of the person and the nation’s vision of eradicating poverty in many countries. Care should be taken by both parties that is the agency and the customer so that there can be harmony between them so that growth and expansion can be realized by both parties. Bibliography Adam S, 2011. Causes of wealth of nations, London: The Clarendon Press. Anthony, D, 2011. Commercial lending, London: Congress Library Cataloguing. Charles, F, A, 2009. International capital markets, London: British Library Cataloguing. David, A, 2013. Banking and capital markets, Australia: College Of Law Publishing. Kaplan, R, 2008. Strategic Performance Measurement and Management in Nonprofit Organizations, New Jersey: Prentice Hall. Lance T, 2002. International capital markets: systems in transition, New York: Centgage Learning. Leila, W, 2012. World Bank lending for small enterprises, New York: World Bank Publishing Group. Lewis, F, A, 2011. Management of business lending, London: Cengage Learning. Susan, B, 2009. Commercial and corporate lending, New York: Oxford University Press. Willmer, R, 2010. Corporate learning, New York: Oxford University Press. Read More