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    PDF LO Business Finance 5

    Uploaded by

    belcarmi21

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    PDF LO Business Finance 5

    Uploaded by

    belcarmi21
    4 views4 pages

    Original Title

    PDF-LO-Business-Finance-5

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    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    4 views4 pages

    PDF LO Business Finance 5

    Uploaded by

    belcarmi21

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Banking and Non-Banking Financial Ins tu ons

    Banking ins tu ons include commercial banks, savings and loan associa ons, and credit unions. Non-
    banking financial ins tu ons include insurance companies, pension funds, and hedge funds.

    What are Banking Financial Ins tu ons?


    Banking financial ins tu ons are in the business of taking deposits from the public and making loans. In
    addi on, they provide other services such as investment banking, foreign exchange, and safe deposit
    boxes. These ins tu ons are heavily regulated by governments to protect consumers and ensure that
    the banking system is stable.

    Types of Banking Financial Ins tu ons

     Depository ins tu ons include banks, savings and loans associa ons, credit unions, and mutual
    savings banks
     Non-depository ins tu ons include finance companies, insurance companies, and pension
    funds

    What is Non-Banking Financial Ins tu on?


    Non-banking financial ins tu ons (NBFCs) are companies that provide financial services such as
    lending, insurance, and investment banking but that are not regulated as banks. This means that they
    have a different set of rules and regula ons to follow.
    Types of Non-Banking Financial Ins tu ons

     Insurance companies: These companies sell insurance policies to individuals and businesses.
    The policies can provide coverage for things like car accidents, medical expenses, or property
    damage.
     Investment banks: These banks help companies raise money by issuing and selling securi es.
    They also provide advice on mergers and acquisi ons, and they trade stocks and bonds.
     Pension funds: These funds provide re rement income for workers. The money is invested in
    stocks, bonds, and other assets.
     Mutual funds: These funds pool money from investors and invest it in a por olio of stocks,
    bonds, and other assets.
     Hedge funds: These funds are private investment partnerships that use a variety of investment
    strategies to make money.
     Private equity firms: These firms invest in private companies and help them grow. They may also
    take the companies public.
     Venture capital firms: These firms invest in early-stage companies with high growth poten al.

    5 Personal Loan Requirements to Know Before Applying

    Credit Score and History


    An applicant’s credit score is one of the most important factors a lender considers when evalua ng a
    loan applica on. Credit scores range from 300 to 850 and are based on factors like payment history,
    amount of outstanding debt and length of credit history.

    Income
    Lenders impose income requirements on borrowers to ensure they have the means to repay a new
    loan. Minimum income requirements vary by lender.

    Debt-to-income Ra o
    Debt-to-income ra o (DTI) is expressed as a percentage and represents the por on of a borrower’s
    gross monthly income that goes toward her monthly debt service
    Collateral
    If you’re applying for a secured personal loan, your lender will require you to pledge valuable assets—
    or collateral. In the case of loans for homes or vehicles, the collateral is typically related to the
    underlying purpose of the loan.

    Origina on Fee
    Though not part of the qualifica on process, many lenders require borrowers to pay personal loan
    origina on fees to cover the costs of processing applica ons, running credit checks and closing.

    4 Personal Loan Documents Your Lender May Require

     Loan applica on
     Proof of iden ty
     Employer and income verifica on
     Proof of address

    Flow chart for loan applica on


    Obliga on of entrepreneurs to creditors
    An entrepreneur must be able to present a feasibility study to a poten al creditor if he is just about to
    put up a business. If the business has already established, financial statements that would show the
    income and loss that the company has taken on from the previous months or years. This is needed
    because creditors would need review if the money, they will be lending to an entrepreneur will be able
    to provide profit for both of them.
    Some creditors will also require a guarantee of an individual or an entrepreneur's character to assure
    them that the money to be lent will be used to fund the business and not the entrepreneur's personal
    ac vi es.
    Entrepreneurs are responsible for se ng up a viable and regular payment scheme that creditors will
    agree to. This needs to be set up in advance and with s set schedule to allow the entrepreneur to set a
    sales target for each week or month in opera on.
    Entrepreneurs must keep a regular stream of financial reports to the creditors.
    Most important of all, entrepreneurs are legally obligated to pay the sum of money they owe their
    creditors whether they are at a profit or at a loss.

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