International Loan Or Lending—A Black Art?

Not after finishing reading this article. International loan, in its simplest form is financing provided by a foreign lender to a US. Borrower. The vice versa is also true, ie when a foreign borrower obtains financing from the US, the loan is said to be international in nature. Therefore a better definition of international loan would be any capital made across the border or offshore. Hence the popular terms Offshore Lending or Cross Border Financing.

While cross border loans had been extended by commercial banks for decades, the worldwide growth in international trade and investment during the previous decades brought renewed vigor to international lending, transforming it from a business engaged primarily in the financing of trade to a much broader based enterprise, heavily involved in transactional lending.

Types Of Capital

Like its domestic counterpart, there are international business loans, real estate and commercial. There is also international mortgage or home loans and refinancing. Some international loan companies and lenders provide personal and payday loans, construction and project financing. In some cases, some capital sources act as consultants in international loan packaging or provide cash payday loan services.

But while foreign credit markets or international capital markets have more moving parts than do domestic markets, they differ only in detail and not in basics. For the lender, lending principles are the same in Providence and in Timbuktu—understanding the transaction, adequate knowledge and understanding of the borrower, risk definition and a clear indication that the loan will be repaid.

The borrower, on the other hand, defines his needs for funds, develops overall financial strategy which will structure the loan in a way that makes the most sense, and negotiates with the lender to meet his requirements. These are reciprocals of the lender’s approach and interact with his standards, his ability to make funds available, and the pattern used in making them available.

It’s As Simple As ABC

You can take comfort in knowing that international loans often share characteristics in common with domestic lending. Six of the more distinct form of international lending are…

Import and export financing.
Loans to corporations or their foreign branches, subsidiaries or affiliates with parent guarantee or other form of support.
Loans to foreign local companies, partnerships, and individuals including, for example, foreign entities of US corporations that borrow on their own without any form of support from the parent.
Loans or placements to foreign banks or to overseas branches of US banks
Loans to governments or to governmental entities.
Project loans put together by international banking consortia to develop raw material, oil, mineral, or for other projects, with ultimate repayment dependent on the success of the project.

While new and specialized patterns are always emerging, most foreign lending by American commercial banks falls within these general categories. For further discussion of international loans and how to utilize our services, join our worldwide collateral enhancement program. Go here and complete a form or review the total membership package. Click here now!

Diversified Funding International
The COMMERCE BANK Building
P.O. Box 402, Worcester, Mass 01613
508-753-1769
Fax 508-340-4977

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