Only after 1979 did clearing banks start making loans with a maturity term in excess of ten years. In the case of a loan to smaller companies, the fixed interest rates are usually set at a premium over base rate ( 3% - 6%). Larger companies who have a good credit rating will probably be offerred the premium on the inter-bank rate which is lower than the base rate. Loans are usually secured on the personal guarantee of the Directors or the owner of small companies and in the case of larger ones, a charge is made against the assets of the company. If the charges are "fixed", that means that they are linked with a specific asset of the company. "Floating" charges are made on the general assets.

All bank loans are based on three elements which the company has to be able to satisfy. The interest rate demanded by the bank, the security demanded

As an epilogue, an alternative to borrowing, the economic value of leasing is calculated by discounting the incremental cashflows of the lease over the borrowing alternative. In addition to the taxation benefits, leasing helps to preserve cash, varies the borrowing portfolio and provides a less restrictive form of finance. Its certainty and flexibility reduces risk and allows the small companies a greater freedom in their investment decision process because rentals are operating expenses.

Rules of the Game: International Money and Exchange Rates.

Long term investments are an integral part of a small firm's growth. Investments in technology mainly, give a firm the potential to expand, provided that the new investment(s) are managed and utilized appropriately, and integrated accordingly into the previous assets of the small firm.

by the bank and the terms of repayment which are open to individual arrangements between bank and borrower although they usually consist of systematic amortization payments made over the full time of the loan.

The Financial institutions which dominate the market for finance, usually seek to invest in such a way so as to ensure that their particular investment is unlikely to affect share prices. This is the strategy to invest small amounts in large companies. These finance Institutions obviously prefer stable long term growth and the most unlikely place to find this is in a young or small company.

Paul R. Krugman, Mitchigan Press, 1995

There is also the question of "what does the firm want the financing for?". The reason can either be for the purpose of expansion or settling previously acquired debt. The truth is that even in the healthiest of cases, a small firm faces certain standard small firm problems such as the difficulty to diversify and transaction costs. For example, if a firm is small, this means that whatever it produces or trades is dealt with in much smaller quantities than a larger firm. Thus, the small firm's accounts read a higher cost in purchasing raw materials (per unit), than the costs a large firm has when purchasing the same raw materials at a much greater quantity.

Some common words found in the essay are:
Loan Stock, Securities Market, , Stock Exchange, Finance Corporation, Issues Market, Companies Acts, Stock Market, University Press, Mitchigan Press, preference shares, raising finance, company issue, financial markets, secondary market, stock exchange, loan stock, ordinary shares, debenture holders, raise finance, purchasing raw materials, cost debt limited, bond loan stock,
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Approximate Pages = 9 (250 words per page double spaced)