Meaning of the financial loan

The financial loan is the generic term for a sum of money that is provided to a private person or a company by a third party and must be repaid within a specified period of time. The lender can be a bank, another institution, or a private individual. The conditions for the financial loan are agreed between the contracting parties. This applies to the loan amount, the term, the instalment payments and the interest. A special form of the financial loan is the tied financial loan, which is relevant between exporter and importer.
 

Financial loan — general

The granting of a financial loan is subject to conditions set by the lender. Good creditworthiness is indispensable to secure the financing. It is generally present when the private person or the entrepreneur has sufficient collateral in the form of income or reserves. The Schufa credit report is also important. However, the Schufa report applies only to Germany; other countries have different regulations for granting loans.
A financial loan can be an instalment loan or an overdraft/current account credit. The instalment loan is paid out in a single amount and must be repaid in instalments. With an overdraft or current account credit, a limit is set within which the borrower may overdraw the account at the bank. A maximum sum of the credit is therefore defined and the credit can then be granted without a separate contract. The money is available at any time and can be repaid flexibly.
A decisive factor in a financial loan is the interest, which can differ significantly. The amount depends not only on the general market conditions and the lender's terms, but also on the borrower's personal circumstances, the term and the loan amount.
 

Financial loan — specific

A financial loan issued by a supplier to the purchaser is known as a buyer credit or tied financial loan. The lending is usually tied to a specific delivery. In contrast to the supplier credit, where the supplier grants a payment deferral or allows instalment payments, a credit institution acts as the lender. This financial institution is a specialised bank. In import/export business, the borrower is the importer of the goods or services or their house bank. The currency for a financial loan is freely selectable. The loan does not have to be in euros; it can also be denominated in another currency. The loan amount for a financial loan is variable and can be up to 10 million euros. This refers to the purchase value of the goods or services. The default risk for this form of financing is very low. In addition, receivables management can be dispensed with. The most important prerequisite for the granting of financial loans is that the goods or services are considered a financeable export transaction.\