Types of Short-Term Loans Quiz and Flashcards

What type of borrowers are usually considered for a balloon loan?

Which type of loan discourages prepayment?

What is a common example of revolving credit?

What distinguishes a revolving line of credit from a retail credit card?

What do lenders consider before setting a credit limit?

Which loan type allows money to be transferred into a bank account without requiring an actual transaction?

Which type of products are Fast-Moving Consumer Goods (FMCGs)?

What is the purpose of a Back-to-Back Loan?

What is the main benefit of a Domestic Bills Purchase Line (BP Line) for businesses?

How does a Domestic Bills Purchase Line work in terms of fund availability?

What is the purpose of Inventory Financing?

How does a BP Line differ from a traditional loan for businesses?

What is a term loan?

What is the typical range of the duration of long-term loans?

What distinguishes short-term loans from other types of term loans?

What is a balloon payment in the context of term loans?

What is the purpose of a revolving credit line?

How are intermediate-term loans typically repaid?

Inventory Financing

Fast-moving consumer goods (FMCGs) are products with a short shelf life due to high demand or perishability (e.g., soft drinks, confections, meat, dairy products, and baked goods).

Back-to-Back Loan

A back-to-back loan is a standby loan available to existing Savings and Time Deposit account holders for personal and business purposes to bridge financial gaps.

Domestic Bills Purchase Line (BP Line)

The Domestic Bills Purchase Line allows businesses to maximize fund use and replenish day-to-day working capital requirements without waiting for normal check-clearing procedures.
The bank purchases dated checks or sales bills and advances the money to the business pending payment from clients and bank clearances.

Revolving Credit Line (RCL)

A revolving credit line has no expiration date and allows customers to continue borrowing as long as the account remains in good standing.
Common examples of revolving credit include credit cards, home equity lines of credit (HELOCs), and personal and small business lines of credit.
A revolving credit line differs from a credit card in that it does not require a physical card or a purchase, and allows money to be transferred into a customer's bank account for any reason.

Term Loan

A term loan is a loan with a fixed duration and regular repayment installments (EMI).
Term loans come in various types, including short-term loans (< 1 year), intermediate-term loans (1-3 years), and long-term loans (3-25 years).
Short-term loans are usually offered to firms that don't qualify for a line of credit.
Intermediate-term loans are paid in monthly installments from a company's cash flow.
Long-term loans use company assets as collateral and require monthly or quarterly payments from profits or cash flow.
Some term loans may be balloon loans, where the final installment is larger than previous ones.

Learn about various types of short-term financing such as Inventory Financing, Back-to-Back Loan, and Domestic Bills Purchase Line. Understand how these financial tools work to bridge financial gaps for personal and business purposes.