An Offshore Business

Money advanced to a borrower, to be repaid at a later date, usually with interest. Legally, a loan is a contract between a buyer (the borrower) and a seller (the lender), enforceable under the Uniform Commercial Code in most states. The terms and conditions for repayment of a loan, including the finance charge or interest rate, are specified in a loan agreement. A loan may be payable on demand (a Demand Loan), in equal monthly installments (an Installment Loan), or they may be good until further notice or due at maturity (a Time Loan).

There are various methods lenders use to categorize loans, both for internal control and for reporting lending activity to governmental agencies, for example, classification by maturity, industry, security, and type of borrower. Bank loans are normally classified by: (1) Commercial & Industrial Loans to business organizations; (2) interbank loans, which are mostly Federal Funds transactions, from one bank to another; (3) Loan Participations or loans to a single borrower shared by several banks; (4) real estate loans, which may be subdivided into construction loans and long-term Mortgage loans; and (5) loans to consumers, such as auto loans and other forms of consumer installment credit. See also Consumer Credit; Credit; Loan Participation; Parallel Loan; Secured Loan; Syndicated Loan; Term Loan; Time Loan; Unsecured Loan; Working Capital Loan.

loan, in business, sum of money borrowed at a particular interest rate. More generally, it refers to anything given on condition of its return or repayment of its equivalent. A loan may be acknowledged by a bond, a promissory note, or a mere oral promise to repay. Because of biblical injunctions against usury, the early Christian church forbade the taking of interest. In feudal European society, loans were little needed by the great mass of relatively self-sufficient and noncommercial peasants and serfs, but kings, nobles, and ecclesiastics were heavy borrowers for personal expenditures. Merchants and other townsmen, especially the Jews, were the moneylenders, and various devices were found for circumventing the prohibition of usury. With the rise of a commercial society, restrictions on the taking of interest were gradually relaxed. Today, banks and finance companies make most loans, usually on collateral, such as stocks, personal effects, and mortgages on land and other property, or on assignments of wages. Credit unions have attained some importance in making personal loans at relatively low interest rates, and microcredit programs and organizations, which offer small-scale loans, have proved useful, particularly in developing countries, in helping individuals to establish small businesses. A pawnbroker lends money on the security of articles left in his shop.

Resource: Answers