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ResumenLa financiación es un factor clave para el emprendimiento, especialmente en periodos de crisis, donde la restricción financiera dificulta más el crédito para nuevos proyectos empresariales de pequeñas y medianas empresas. Las Sociedades de Garantía Recíproca facilitan con su aval el acceso a préstamos a largo plazo. Este trabajo analiza la financiación bancaria del emprendimiento en España a través de las Sociedades de Garantía Recíproca del segmento de microempresas (menos de 10 trabajadores) en el periodo 2003-2012, para determinar si la crisis ha modificado sus necesidades de financiación. El análisis concluye que durante la crisis (2008-2012) ha cambiado la distribución de productos financieros, aumentando el peso de aquellos destinados a necesidades de tesorería, y los efectos son más intensos cuando la empresa tiene menor tamaño y más antigüedad.AbstractFinancing is key to entrepreneurship, especially in crisis period, when financial markets restriction hinders access to funding to small and medium enterprises. The Mutual Guarantee Institution facilitates funding to new businesses through guaranteed long term loans. This paper analyzes banking entrepreneurship financing to micro-enterprises (less than 10 employees) in Spain during the period 2003-2012, but only Mutual Guarantee Institution guaranteed enterprises, to determinate if financing products have changed. The analysis concludes that the financial products distribution has changed during the crisis (2008-2012), it has increased the weight of the products designed to liquidity, and the crisis effects are higher for smaller and older companies.

This chapter examines credit structuring possibilities for banks in emerging markets. A clear understanding of loan structure is critical for successful loan utilization and repayment by borrowers. In most cases, delinquent loans have structural problems. At the outset when a credit request is being appraised or granted, a bank often contends with the task of devising an arrangement that will ensure that utilization and repayment of the loan will be in accordance with terms agreed with the borrower. Inappropriate credit structure portends risk of loan default because of possible conflict with the borrowing cause. Unfortunately, borrowers tend to concern themselves with fulfilling loan conditions and seem less bothered about loan structure. Yet the structure is as important as conditions of the loan in mitigating default risk. Often this fact begs for recognition by borrowers and lending officers alike. It behooves credit analysts to educate borrowers on appropriate and applicable loan structure.

While there is a wide variety of debt finance available for projects, commercial bank loans have traditionally played the most important role in the project finance markets. The purpose of this chapter is to explain the role of commercial banks in project finance and to examine how syndicated loans are raised in practice for project finance transactions.

A loan is secured when it is backed up by collateral and right of recourse over and above the personal promise of the borrower. Security ensures that borrowers fulfill their primary obligation of repaying loans granted to them. It provides banks with an alternative source of loan repayment. The import of this is that a bank could recover a loan if a borrower either cannot or will not voluntarily pay back the loan. Thus, security reduces the risk of investment in risk assets. As prudence demands, a bank should seek additional protection over and above mere promise of borrowers to perform and pay back their loans. This chapter focuses on a critical assessment of types of security for bank lending in emerging economies. It explores contemporary challenges in taking and documenting collateral to secure loans in emerging markets. It also examines the intricacies of perfecting loan security and documentation in emerging economies.

Loan recovery is the terminal action that a bank may want to take in a failed credit relationship. It starts when remedial measures taken to revive a delinquent loan prove unsuccessful. The basis of loan recovery is that a bank cannot afford to carelessly lose a risk asset. Bank management is accountable to its supervising board for avoidable loan losses. Unfortunately, it would appear that loan defaulters in emerging markets do not seem to appreciate this fact when they face the risk of recovery actions—as in foreclosures. This chapter investigates why they would want to thwart even innocuous actions to recover their bad loans. One could opine that loan recovery should be conducted with a human face and the milk of kindness. Otherwise it might prove to be an arduous task and quite frustrating. Doing it well helps to check the intrigues that often characterize taking actions and the responses to them.

The premise of this chapter is that credit risk increases with loan tenor. Thus, a bank that grants long-term credit must adopt an effective risk management methodology. While this may not be altogether different from the traditional risk control framework, it demands a rigorous prognosis of future events that might affect loan performance. The two basic considerations that favor adoption of a rigorous methodology for risk control in long-term lending are established. Firstly, the usual source of repayment of term loans—one on which banks reluctantly rely—is uncertain future earnings or cash flows. This is unlike what is found in short-term lending where loan repayment is often expected from liquidation of particular trading or other short-term assets. Secondly, in emerging economies, long-term funds are short relative to credit need. These facts are analyzed to shed light on the difficulties that banks in emerging economies experience in pooling stable funds for long-term lending.

What is the overall credit philosophy of financial institutions? Lenders require not only a sense of caution as they move on from the debt crisis but also the courage and wisdom to take reasonable risks. Financial institutions succeed as long as the risks they assume are prudent and remain within clearly defined parameters of portfolio objectives. This means enacting policies and procedures; ensuring that exposures are properly identified, monitored, and controlled; and making sure that loan pricing, terms, and other safeguards against non-performance or default are commensurate with levels of risk that banks commit to. In short, banks are in the business of making loans, which is what banking is all about.

In this chapter we consider an important commercial application of compound interest and equations of value, namely loans . In particular, we discuss how to calculate regular repayment amounts and methods for calculating the loan outstanding at any time within the term of the loan. The chapter ends with a brief discussion of alternative definitions of the interest rates that can occur in commercial practice.

Publisher Summary This chapter focuses on various sources of finance that can be used by the companies to raise finances. Some form of loan finance, including options such as leasing, are usually the most appropriate method of funding asset purchases, whereas funding from other investors may be used to finance the longer-term development of the business. Any application for finance, be it for loan, investment or grant funding, needs to demonstrate the credit-worthiness and viability of the business to the potential financier. Debt finance is usually seen as more accessible than investment finance, and it generally requires a lower level of accountability. A bank term loan may be a good option, especially if the repayment period can be linked to the life of an asset or project. The Small Firms Loan Guarantee Scheme helps small businesses, which are unable to obtain conventional loans because of a lack of security. Factoring or invoice discounting can be used to boost cashflow but is not a suitable means of raising finance for capital or longer-term projects. Contract hire is a common form of operating lease for motor vehicles and certain manufacturers or dealers provide finance for the purchase of their own products. A business may be able to raise additional finance through the issue or sale of equity capital, although entrepreneurs often view it as a serious disadvantage in losing an element of control. Grants can also provide an excellent source of finance, especially for new and developing businesses, but the process for obtaining a grant can be slow and any grant offered usually meets only part of the overall funding requirement.

Publisher Summary This chapter discusses the interest rates and credit. It presents an understanding of how interest rates determine the amount of loanable funds available as credits for economic activities. Interest rates may be thought of as the cost of borrowing the funds. Institutions provide a myriad of financial services such as lines of credit, term loans, negotiable certificates of deposits, etc., at a cost to creditors for making the funds available. Some organizations, such as the companies listed in the organized exchanges and the government, can issue financial instruments at stated or implied cost for having access to funds. The chapter presents an introduction to the behaviour of interest rates over time accompanied and also explains the cyclical trend in interest rates over time. From an analytical point of view, the primary forces that determine changes in interest rates are found in economic activities that appear to move in periodic cycles.

This chapter discusses the intermediate-term sources of funds. A variety of private financial institutions are active in providing intermediate-term financing, the chartered banks are the dominant source for such funds, both to the business, and to the personal sectors of economy. Trust companies are assuming a growing significance in providing business loans, and credit unions, and caisses populaires continue to play an important role, in particular for small- and medium-sized businesses at the local level. In addition, a growing number of other firms that are often either wholly or partly owned subsidiaries of major financial institutions, such as banks, view term-lending as one of their activities. The Bank Act has restricted the activities of the chartered banks in areas that are not regarded as an integral part of banking. As a consequence, banks have only been able to participate in such areas indirectly, mainly through equity participation in other investment and financing companies. The particular forms that term loans may take are too numerous to review and are often tailored to meet specific circumstances.

This chapter elaborates the cumulative sinking funds. The amount that the borrower, usually a company, or corporation of some standing, has to set aside each year to redeem the loan eventually and pay the interest on it in the meantime is called the annual amount for the service of the loan. As the loan holders are usually a large number of people holding amounts of loan differing perhaps between half a million pounds and a hundred pounds, it may not be possible or practicable to apply precisely the amounts set aside for service to paying interest and redeeming those due for redemption. Redemption itself is often carried out in what might appear to be a somewhat haphazard manner, simply by ballot, so that an individual holder of, say, £100 of loan stock, would not know whether he will get his £100 of loan capital repaid this year, next year, sometime, or at the end of the term.

This chapter explains the bogey of taxation. One of the domestic purchases on which most interest is paid, because of its cost, is the car; there are, however, a number of finance companies that now offer loan facilities by way of arranging a personal loan by a bank, which enables claiming tax relief on the interest payments. The basis of the personal loan is the bank making available a loan to be repaid over a fixed period, usually 1 or 2 years, by monthly payments, with the rate of interest apparently similar to the overdraft. The flaw from the borrower's point of view is that as one sees with regular hire-purchase payments, the nominal or apparent rate of interest is not what the borrower is really paying. This is because the borrower does not have the use of the whole of the money, on which the interest rate is based, over the whole period of the loan, as the borrower starts repaying it almost immediately; therefore, the true interest rate charged is approximately double the apparent rate.

This chapter elaborates the mortgages and other loans repaid by level installments. A mortgage deed is a legal document setting out details of a loan secured on property and the amount of the loan, the rate of interest, how and when the loan is to be repaid, remedies for the lender if it is not so repaid, and only occupying a relatively insignificant place in the order of things, provision for repayment of the lenders money in the event of the borrowers death. Even in that event, it is not unusual for there to be some collateral contract, such as an endowment assurance, which will provide the repayment moneys, and, thus, leave the borrowers widow in possession of the property which constituted the security. Such is the contract colloquially known as a mortgage on the endowment plan. A portion of each installment is interest on the loan and the remainder repays the capital that the society lent.