debt assumed by consumers for purposes other than home mortgages. Interest on consumer loans had been 100% deductible until the tax reform act of 1986 mandated that the deduction be phased out by 1991. Consumers can borrow through credit cards, lines of credit, loans against insurance policies, and many other methods. The Federal Reserve Board releases the amount of outstanding consumer credit on a monthly basis.

loan that is collateralized by assignment of rights to property and a security interest in personal property or real property taken by the lender. Amortgage borrower (the mortgagor) gives the lender a mortgage in the property financed. A business loan can be secured by cash, inventory, receivables, marketable securities, or other acceptable collateral. In event the borrower fails to repay according to the original credit terms, the lender can take legal action to reclaim, and sell, the collateral. Contrast with unsecured loan, which is backed only by the borrower's promise to pay-a promissory note.

four-party loan involving parent companies and their subsidiaries in different countries. A parallel loan is an arrangement to borrow in the currency of one country with a promise to pay interest and principal at a later date. The loan is collateralized by a concurrent loan from a multinational parent company to its affiliate in a foreign country. Aparallel loan is similar to a back-to-back loan, or two-party loan, in that it transfers surplus liquidity from one currency to another. Its main disadvantage is that the lender's right of offset in event of default is unclear, and it is less flexible than a back-to-back loan. The two-party loan is safer from the lender's view because, if the subsidiary defaults, the multinational parent normally is obligated to make good on the loan.

loan extended by a group of banks to a corporate borrower. The loans-usually made at interest rates tied to a variable rate index such as the London Interbank Offered Rate (LIBOR) or rates on bank certificates of deposit-are often sold to investors in the secondary loan market. In recent years, institutional investors such as mutual funds became major buyers of syndicated loans.

Syndicated loans to major corporate borrowers are rated by credit rating firms such as Standard & Poor's, using a rating system similar to that used for corporate bonds. With the creation of a secondary market linking loan-originating banks with investors, multi-bank commercial loans may some day trade as actively as corporate debt securities in the over-the-counter (otc) dealer market. Contrast with highly leveraged transaction, a high-interest rate loan extended to riskier borrowers.

intermediate- to long-term (typically, two to ten years) secured credit granted to a company by a commercial bank, insurance company, or commercial finance company usually to finance capital equipment or provide working capital. The loan is amortized over a fixed period, sometimes ending with a balloon payment. Borrowers under term loan agreements are normally required to meet minimum working capital and debt to net worth tests, to limit dividends, and to maintain continuity of management.

short-term business loan

that is payable in full at a specified maturity date, e.g., 30, 60, 90, or 120 days. Interest on this type of loan ordinarily is deducted (discounted) in advance when the loan is made. It differs from a demand loan in that the lender cannot call or demand repayment of a time loan before the maturity. Time loans are repaid from turnover of assets, for example, the sale of inventory or collection of accounts receivable.

1. entry on the right side of an account. As a verb, to make an entry on the right side of an account. Under the double entry bookkeeping system, credits increase liabilities, equity, and revenues and decrease assets and expenses.
2. to enter or post a credit.
3. the ability to buy an item or to borrow money in return for a promisem to pay later.
4. in taxation, a dollar for dollar offset against a tax liability.

borrowing that is not secured by a mortgage on a specific property. It is backed only by the borrower's credit rating. Unsecured loans are typically short term. The disadvantages of this kind of loan are that, because it is made for the short term and has no collateral, it carries a higher interest rate than a secured loan, and payment in a lump sum is required.

short-term business loan financing the purchase of income-generating assets, principally inventory. Working capital loans are generally written with lending terms requiring ful lpayment within a specified period, such as 60 days or 90 days from the date the funds are advanced.

sharing of a loan by a group of banks that join together to make a loan too large for any one bank to handle. Also known as participation financing, loan participations are arranged through correspondent banking networks in which smaller banks buy a portion of the overall financing package. Large syndications may run into hundreds of millions of dollars, and involve more than one hundred different banks. Syndications are also a convenient way for smaller banks to book loans that would otherwise exceed their legal lending limits. By selling most of the financing to an upstream correspondent, the local bank earns fee income from servicing the loan, and is able to retain other banking relationships, such as checking accounts.

lien securing a note payable that has as collateral real assets and that requires periodic payments. For personal property, such as machines or equipment, the lien is called a chattel mortgage. Mortgages can be issued to finance the acquisition of assets, construction of plants, and modernization of facilities. The bank will require that the value of the property exceed the mortgage on that property. Mortgages have a number of advantages over other debt instruments, including favorable interest rates, fewer financing restrictions, and extended maturity date for loan repayment.