Commercial loan rate

European Venture Capital is likely to exhibit fast growth over the next decade, and UK venture capitalists have the expertise to be very powerful competitors. FINANCE HOUSES There are 47 finance houses in the UK. Finance houses are a diverse grouping of financial intermediaries that carry out a variety of instalment credit facilities for the personal sector: hire purchase, credit sale, conditional sale, secured and unsecured personal loans, revolving loans and repayment loans.

For the industrial and commercial sector services include leasing, factoring, industrial hire purchase, commercial loans  and stocking loans, and block discounting. 1. Hire purchase -- personal customers hire goods for an agreed length of time and buy them at the end of the period for a low price. The goods are owned after the last instalment. 2. Credit sale -- the customer buys the product (and legally owns it from day one) but pays by instalments. 3. Conditional sale -- the price of the product is paid by instalments, but the product remains in the ownership of the seller for a pre-set period of time, often until the last instalment has been paid. With these three methods of finance the finance house provides the funds and a percentage rate of interest.

The seller of the goods may wish to simply pass on the interest charges to the customer, or may wish to push up the price of the product and market it as zero interest finance. 4. Secured and unsecured personal loans -- loans are provided for fixed periods of time, often at fixed rates of interest and equal instalment payments. For larger loans security may be required.

Obviously there is intense competition from banks and building societies. 5. Revolving loans -- personal customers under this type of arrangement can borrow a multiple of monthly payment, e.g. $30 per month may be paid to the finance house which allows up to 15 times that amount to be borrowed ($450). 6. Repayment loans -- customers pay fixed monthly repayments based on what the Finance House expects the market interest rate to be over the period of the loan, and at regular interval or the end of the loan, the difference between actual and estimated interest rates is calculated, and the difference is paid or received by the customer. For commercial customers services include: 1. Leasing -- these are mainly used for large plant and equipment. A lessor (in this case a finance house) hires out capital equipment to a lessee, and the ownership of the equipment rests with the lessor. Two main types of lease exist, financial and operating. With the former rental is set up at such a rate that the full cost of the equipment is recovered plus a return, whilst with the latter the contract is shorter and the same equipment may be leased to a number of lessees.

The lessor receives capital allowances against tax. 2. Factoring -- factoring services can involve the full operation of companies' invoicing and debt collection, credit protection through cover on sales made, and payments of up to 80 per cent of debts in advance of collection. With many businesses waiting up to two-three months for payment, and research showing that many companies fail through poor cash flow, factoring is a very important service to industry. 3. Industrial Hire Purchase -- the same as hire-purchase for personal customers but for items of capital equipment. 4. Commercial Loans   -- either secured or unsecured, and used for a variety of purposes. 5. Stocking loans -- used specifically to allow companies to hold necessary volumes of stock, as in car dealerships. 6. Block discounting -- a finance house may buy a " block " of debtors from a company at a discount, and follow them up for the company. Cash flows are improved and possible defaulters removed.