Question

Money borrowed from a bank to purchase new machinery would be considered which of the following?

Answer 1

Hi Sir,

Your question is incomplete. There isnn't enough information as to the options. The question stays as an open ended question without naming the "following options". If you could comment the options, I can further help you on that.

I am giving my asnwer on a general note; ie; on a normal business, the name called for money such borrowed.
When money is borrowed from bank to purchase new machinery, such a loan will be called as Secured Loan or Mortgaged Loan.

When banks or other financial institutions lent loan to businesses for the purchase of any specific asset, the lender usually take the aforementioned asset as security. This means that, when the business is unable to repay the loan, the said asset will be taken by the lender. The lender gets a right over the asset when the repayment is not made. Hence, such a loan is called as Secured Loan.

Secured loans are loans backed with something of value that you own, called collateral. Common examples of collateral include your car or other valuable property such as jewelry. If you’re approved for a secured loan, the lender will hold the title or deed to the collateral or place a lien on it until you pay the loan off in full. If you don’t repay your loan, the lender may take possession of the asset, sell it and apply the proceeds to your outstanding debt. Due to the use of collateral, the borrowing limits for secured loans are typically higher than unsecured loans. Secured loan rates could be lower as well.