Question

Discuss the top three sources for companies to borrow money from, for a new building purchase, what are the typical lending interest rates, required collateral, and repayment terms at each of the three sources.

Answer 1

Top three sources for borrowing of money in order to buy a new building for a company would be as follows-

A. Commercial banking loan would be the most appropriate and most common source of borrowing because they will be offering the loans at normal rate of interest like 10% per annum which will be followed with the interest payments at regular intervals and the company will also required to put collateral for those loans.

B. The company can also borrow loans from public agencies which are authorised organisations of the United States Government and they can be issuing the loans to these companies at a considerable a lower rate of interest but their requirements will generally be higher because they want to issue secured loans like Fannie Mae.

They will be requiring collateral but their rate of interest will be comparatively lower and it will be offered at easier terms and condition.

C.they can also borrowed the loans from 'peer to peer lending' method and these peer to peer learning method would be helpful from obtaining the loans from other business organisation at a subsequently higher rate because other business organisations will be offering loans at complex terms and conditions and higher rates and they need to be extremely costlier source of Financing for the business and they may charge up to 15 to 20% of rate of interest.