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The borrower intends to get that object or the money for its purpose and its obligation to repay the same without any default. The lender's objective is to earn a premium over the object or money that he has in access. It's his obligation to be fair with the borrower and do not take any undue advantage.
Understanding How Borrowing and Lending Works In the most basic sense, lending is the act of giving money to someone now with the expectation they will pay you back in the future.In return for lending the money, the lender charges the borrower a percentage of the amount borrowed, which is known as an interest rate.
The relationship between the borrower and lender has always been known to be an integral factor in the loan approval process. As the lender gains more information on the borrower through a longer relationship, the terms of the loan will change.
The buyer of a bond is a lender. The seller of a bond is a borrower. The bond buyers pay now in exchange for promises of future repaymentthat is, they are lenders. The bond sellers receive money now and in exchange for their promises of future repaymentthat is, they are borrowers.
A person or company that has received money from another party with the agreement that the money will be repaid. Most borrowers borrow at interest, meaning they pay a certain percentage of the principal amount to the lender as compensation for borrowing.
A borrowing base is the amount of money that a lender is willing to loan a company, based on the value of the collateral the company pledges.The resulting numerical figure represents the amount of money a lender will loan out to the company.
Total up the value of all your assets: inventory, equipment and accounts receivable. This is your collateral amount. To determine your borrowing base, multiply you collateral amount by the percentage at which the bank is willing to loan to you.
Dilution of receivables.Dilution of receivables represents the difference between the gross amount of invoices and the cash actually collected for such invoices. Factors such as bad debt write-offs, warranty returns, invoicing errors, trade discounts and returned goods all are involved in computing dilution.