International Banking Law Essay Example | Topics and Well Written Essays - 3500 words

International Banking Law - Essay Example1 This probe shall look into the fictitious situation where an online company selling books is loaning a sum of money from a aver to distend and diversify their online operations. The essay attempts to advise the bank in dealing with the loan situation. The situation has therefore been viewed from the banks perspective. The essay has been dealt with in two parts.Before any legal advice is given to Spring Bank regarding the type of loan and form of security, it is important to break down the situation. To do this a few concepts have to be cleared. Since magnanimous an overdraft to pass Ltd. is an option open to Spring Bank, one must consider what an overdraft is and when is an overdraft unremarkably given by a bank. An overdraft is the amount of money that domiciliate be overdrawn from a current account, subject to a termination already agreed with the bank. There are certain facilities of an overdraft. With an overdraft, you stipend money for the amount of money you make use of and only for the period you use. For example, an overdraft gutter be drawn to pay the supplier and within a calendar week the money can be again deposited into the account, after the money comes from the buyers. Overdraft is thus an efficient form of borrowing, usually made to tide over short-term property-flow fluctuations. Since interest is calculated daily on the fluctuating with child(p) balance and is normally charged at the end of each month, there is flexibility. 2 3 4 However, in the case of Winter Ltd, the company is not looking for money to make some business payment, which cannot be accommodated from the available cash balance in their current account. It is looking for money for business diversification, which requires a permanent source of funding rather than short-term financing. So, Spring Bank should not agree to an overdraft facility but should give a term loan, as advised by their risk committee. Now, that it has been clearly established that Spring Bank lead give Winter Ltd. a loan to diversify its business, one has to look at the loan options that the bank can offer the company. The advantages of giving a loan is that both the business and the bank ordain do the exact terms of repayment and the amount of interest to be paid and when. The Loan Options that the Bank will ConsiderLets now consider the various loan options available to the bank. Banks are conservative lending bodies. A bank loan will be available usually against a security. This brings us to a full(a) categorisation of loans into secured and unsecured. A secured loan is a promise to pay a debt, where the promise is secured by granting the creditor an interest in specific property or collateral of the debtor. In the case where a debtor does not pay the loan in time, the creditor has the right to seize the property that has been kept as collateral, and recoup the loan. Though an unsecured loan also promises to pay the debt , the promise does not include giving the creditor any interest in a picky property. In case of an unsecured loan the lender relies on the fact that the borrower is credit worthy and can be trusted. Particularly for small businesses (though it has not been specifically mentioned that Winter Ltd. is a small business, one can assume such as it is a company