Borrowing costs refer to the expenses incurred by an organization when it borrows money. These costs typically include interest payments and may also encompass arrangement fees and intermediary fees. Depending on accounting standards and conditions, they can either be expensed immediately or capitalized as an asset.
A ceiling on a charge; for example, an interest-rate cap would set a maximum interest rate to be charged on a loan, regardless of prevailing general interest-rate levels.
Understand the accounting process of including borrowing costs in the cost of a qualifying asset and how this affects financial statements.
A Face Interest Rate is the percentage interest rate specified on the bond or loan document. It differs from the Effective Rate, which is a more meaningful yield figure reflecting the actual cost of borrowing.
A facility fee is a charge that a borrower must pay to a lender for the opportunity to borrow additional funds. Typically applied in syndicated loan agreements, the facility fee compensates the lenders for making credit available.
Financing cost refers to the expense incurred by an entity for funding its operations and activities. These costs can include interest payments on loans, fees for issuing bonds or equity, and other related expenses.
Negative carry is a financial situation where the cost of financing an investment exceeds the yield generated by that investment.
Negative leverage, also referred to as reverse leverage, occurs when the cost of borrowing exceeds the returns generated from investments. This situation creates a net loss for the investor, contrasting with positive leverage where borrowed funds generate higher returns.
The rate of interest represents the cost of borrowing money expressed as a percentage of the principal amount. It is a fundamental concept in both personal and corporate finance, impacting loans, savings, investment decisions and the overall economy.
A standby fee is a sum required by a lender to provide a standby commitment within a certain period. This fee is forfeited by the borrower if the loan is not closed within the specified timeframe.
An exploration of subprime lending: providing loans to borrowers with poor credit ratings. Discussing the risks, costs, and historical implications—especially the role in the 2007-08 financial crisis.
