Acquisition and Development Loan (ADC)
A & D loan stands for acquisition and development loan, which is backed by a mortgage and used to finance the purchase, installation, and improvements required to convert the land into a site ready for construction of buildings.
ADC loan stands for acquisition, development and construction loan and covers those aspects of the project. It is used to finance the land purchase, make improvements to get it ready and make constructions.
Spec loan is the term used for a loan on a speculative property that the property developer has not sold. The loan to finance the construction of a real estate project for which the sales have not been arranged comes under a spec loan.
Bridge loans are taken for the short-term, used to pay off an immediate obligation or finance the immediate need for funds until the entity obtains a permanent or long-term loan (Ramanigopal, 2018).
Debt load is the amount of debt burden that a company or individual bears. It is the total amount of external obligations of the company represented in its balance sheet under the liabilities head.
Debt service is the amount of cash required to pay the loan’s interest cost and the repayment of the principal amount. It is calculated for a period as the interest expense depends on time. It is useful for estimating if a company can meet the debt service cost before extending a loan to the company.
Debt service coverage is the ratio between the operating income and the debt cost of a company. It measures whether a company can meet the current cost of servicing debt from its operating income or the available cash (Samsu, Ismail & Sab, 2016).
The feasibility study is the estimation of a project’s success rate by considering all the aspects relevant to a project like the economic, legal, technical, and financial factors. It studies whether the project can generate profits for the company and the risk associated with the project.
A markup is an amount added to the cost of a product to get the selling price that will provide the desired amount of profit on selling the product.
Net present value is the value of all the cash flows of a project taken at the present date after discounting. It is the net of all the cash inflows and outflows after discounting at the required rate of return. It is used to analyze a project’s profitability and make decisions regarding budget and investment (Benamraoui et al., 2016).
Pro forma statements are prepared based on data that are assumptions and estimates about the future value of the items in the statement, prepared to evaluate the future performance of a project and estimate its profitability.
Ratio analysis is an approach in quantitative finance that helps estimate the liquidity, profitability, and efficiency of a company or business entity. It is performed on the information available in the financial statements.
Relationship banking is a concept used by banks to connect with their customers and provide a single point from which they can obtain all services, going beyond the transactional baking services. Under this strategy, the banks offer other financial services to their customers that help fulfill the customers’ financial goals and boost the bank’s revenue (Agarwal et al., 2018).
Company valuation is a process of determining the current economic value of a business using methods like discounted cash flow method. It is used to calculate the total fair value of a company or the value of its equity, which the investors use for making their investment decisions.
References
Agarwal, S., Chomsisengphet, S., Liu, C., Song, C., & Souleles, N. S. (2018). Benefits of relationship banking: Evidence from consumer credit markets. Journal of Monetary Economics, 96, 16-32.
Benamraoui, A., Jory, S. R., Boojihawon, D. R., & Madichie, N. O. (2016). Net present value analysis and the wealth creation process: A case illustration. The Accounting Educators’ Journal, 26.
Ramanigopal, C., Manickam, G., Thirukumaran, P. G., & Padmasree, M. (2018). Impact of bridge loan for property management in real estate sector. International Journal of Research in Social Sciences, 8(1), 120-126.
Samsu, S. H., Ismail, N. A., & Sab, C. (2016). Debt Repayment Capacity in the Emerging Markets and Developing Countries: A Literature Review and Future Research. International Journal of Humanities, Social Sciences and Education (IJHSSE), 3(7), 59-67.
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