Cross Collateralization
What is Cross Collateralization? Cross-collateralization occurs whenever a borrower pledges one asset to serve as collateral to secure multiple loans, enhancing the appeal for lenders. Although the default risk may be lower if the lender deems the existing collateral stronger than other security associated with the new debt, defaulting on any loan may be an...
Problem Loan
What is a Problem Loan? A problem loan is often referred to as a problem credit, or an impaired asset since, counterintuitively, loans are an asset for a creditor (as opposed to a liability for the borrower). In simple terms, a problem loan is one that poses a “challenge” for a lender. It may occur...
Interest
What is Interest? Interest refers to the cost of borrowing money or the reward for lending money. Typically, banks charge interest on money borrowed on top of the expected repayment of the principal. At the same time, banks also pay interest on depositors’ funds in savings and investment accounts. They do so to entice more...
Hard Money
What is Hard Money? Hard money comes with many different meanings depending on the context and can relate to currency, loans, and political donations, to name a few. In general, it refers to a specific funding chain that is generally provided by a government agency or other financial organizations. Rather than a one-time permit, hard...
Project Life Coverage Ratio (PLCR)
What is the Project Life Coverage Ratio (PLCR)? The project life coverage ratio (PLCR) refers to a financial ratio that is used to determine the repayment ability of a project’s cash flows to its debt obligations. Lenders set a minimum PLCR to constrain the borrower’s maximum loan amount, thus reducing the risk of default. Understanding...
