Wednesday, April 27, 2011

The Long term credit

The long-term funding is a funding for a period of not less than seven years. The credit is generally used to finance the purchase or construction of property of significant value, for example, buildings or industrial buildings, large equipment whose useful life is more than seven years.  It is also the capital funding for businesses, but the amortization period exceeds seven years. So it's heavy capital.

 Thus, when a company or an individual looking for a competition to fund the construction of a road, a factory or a building, it is clear that the importance of investment capital is such that reimbursement may be considered in time similar to those of medium-term credit for the good reason that the tax depreciation of these investments may not be realized in the long term.
 In fact, the newly built factory will bear fruit only after several years.  It leads inevitably to the concept of depreciation that occurs and determines the time of repayment.

 It is therefore imperative, like the medium term, to focus the profitability of the company and consider the elements on: the evolution of turnover in recent years and its prospects especially future, and the cash flow of past and future, net profit after tax also past and projected.
Unlike the medium term, the proportion of bank intervention that is 70% or less of the total project to incur the long term is limited to 50% maximum.  All the rest of the conditions and terms for this category of credit remains the same as the medium term.

 Finally, it is clear that the classification, whether it is long-term credit or the medium term credit is only according to their duration, which is, more than seven years and can reach 20 years and over, for the long term,
and between two to seven years for the medium term. The fact remains that it is closely and directly from the purpose and its funded depreciation determines the time of repayment.


Post a Comment