Thursday, March 8, 2012

Medium or Intermediate term financing

Medium/Intermediate term financing:

Normally any finance having maturity of more than one year but less than five years its consider
intermediate/medium/term financing. It has some characteristics which are given bellow:

1. Maturity one-five years.
2. Size of the loan is normally not very big but greater than short-term and less the long-term
3. Users of term/intermediate financing: Business: Business of all sizes need medium term finance.
Usually the firms which has not entrance to the capital market they can use medium term
financing by specialized banks, commercial banks etc. Normally the firm’s uses medium term
finance in terms of to finance their fixed assets.
4. Repayment procedure: Normally term loan/medium term loan are repaying by installments basis
but sometimes it is repaid by a single repayment. Repayment procedure depends on the
agreement between borrower and lender.
5. Security provision: Since term loan are for a longer periodic time and are use to purchase long
term assets, such as secured by there fixed assets.
6. Cost term: Normally cost of the term loan is its paid of interest. Normally rate of interest of term
loan is relatively less than long term financing but greater than the short term sources of

Types of intermediate/medium/term finance:
1. Bank term loan: Normally the commercial banks provides term loan for a period of one year or
more and it is back by repayment schedule.
2. Revolving credit: Revolving credit has two element of cost. One is regular interest on the
withdrawn portion and another is commitment fees that means undrawn portion.
3. Insurance company’s term loan: Insurance company could also be provides term loan.
4. Equipment financing:

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