Problemi Ekonomiki (Mar 2015)
Crediting Businesses as a Form of Financial Support
Abstract
In the article the modern methods of crediting businesses in Ukraine have been considered and practical recommendations on choosing a particular form and method of crediting, which depends on the characteristics of the borrower activities, its creditworthiness, crediting purposes and objects have been offered. Today the most common crediting methods in the banking practice are: credit line, overdraft, non-instalment term credit. Each of these methods has its own characteristics, which are suitable for specific areas of the organization activity. It has been found that the credit line benefit is that the borrower is given an opportunity within the fixed limit to use the credit funds immediately at the moment the need arises, which in its turn allows reducing the cost of the credit servicing, however, the main disadvantage of this method of crediting is that in the case of difficulties with the repayment of the previous tranche the bank may reduce or cancel the credit limit and enter an additional fee on the unclaimed credit line limit. Overdraft crediting is characterized by a rapid procedure of obtaining a credit, can be granted without security, does not have a targeted character, allows providing payments from the current account, at the same time the interest rate on the overdraft is higher than that on other credits, and another disadvantage is the requirement of mandatory and in a certain, relatively short time repaying the credit. Crediting in terms of lump-sum cash disbursement is characterized by simplicity in granting and consistency in the organization of the crediting process, but the accrual of interests occurs immediately after the transfer of funds to the borrower on the full amount of the received credit. Thus, when deciding on obtaining a bank credit the entrepreneur has to choose one or another method of crediting taking into account all the advantages and disadvantages of the chosen method.
