Only after 1979 did clearing banks start making loans with a maturity term in excess of ten years. In the case of a loan to smaller companies, the fixed interest rates are usually set at a premium over base rate ( 3% - 6%). Larger companies who have a good credit rating will probably be offerred the premium on the inter-bank rate which is lower than the base rate. Loans are usually secured on the personal guarantee of the Directors or the owner of small companies and in the case of larger ones, a charge is made against the assets of the company. If the charges are “fixed”, that means that they are linked with a specific asset of the company. “Floating” charges are made on the general assets.

All bank loans are based on three elements which the company has to be able to satisfy. The interest rate demanded by the bank, the security

Financial Markets and Institutions, second edition.

The primary function of these markets is to match the lenders to the borrowers and effect the directing of funds between them.

The small company may issue a debenture, which is a document issued in return for money lent. There are various types of debentures but they all have some features in common. They are usually in the form of a bond, undertaking the repayment of a loan on a specified date and with regular stated payments of interest between the date of issue and the date of maturity. These dividends have priority to be paid before any other dividend is paid to any other class of shareholder. The Companies Acts define the word “debenture” as including debenture stock and bonds. Often the terms debenture and bond or loan stock are interchangeable although I shall mention Bond and Loan Stock a little later on.

Some topics in this essay:
Loan Stock, Securities Market, , Stock Exchange, Finance Corporation, Issues Market”, Stock Market, Companies Acts, Mitchigan Press, University Press, raising finance, preference shares, company issue, financial markets, secondary market, stock exchange, ordinary shares, debenture holders, raise finance, specified date, cost debt limited, purchasing raw materials, bond loan stock,