Features of bank Loan

4. Bank loans

Loan is a specified sum of money lent by a bank to a customer, usually for a specified time, at a specified rate of interest. In most cases bank asks for some form of security (collateral security) for loans.

Features of bank Loan

• It is a formal way of borrowing from a bank for a period of 2-5 years
• It is relatively simple to arrange once the banks lending criteria have been met.
• Generally collateral securities will be required to obtain bank loan.
• It is repaid in periodical instalments along with the fixed rate of interest.
• Features of retained profits.
• This means the capital raised by the company by re-investing or ploughing back the past profits of the company.
• It is best suited for long term requirements of the business.
• It might not be suitable for fast expansion programmes.