Lien: "U.S. small business loans in arrears rise"

Corporate finance is a notion that covers many meanings, but in general, it refers to the way corporations finance their business. It’s a way of making sure that your company is financially healthy in the long – term.

The article I found concerning the matter is called: “U.S. small business loans in arrears rise: PayNet". It talks about how in August of this year there was a rise in the loans, lines of credit and leases, granted to small and medium – sized U.S. businesses, that were not repaid in time. This was reported by PayNet Inc. PayNet is an organisation that collects loan information from more than 225 leading U.S. capital equipment lenders. It has a database of more than 15 million current and old lending contracts, with a value of 645 billion dollars. Not very surprising, knowing that “more than half the money invested in plants, software, etc. in the United States in any given year is financed with loans, lines of credit and leases”.On the other hand, PayNet says its small business lending index that had risen in June and July had dropped again in August at an annual rate of 20%. The president of PayNet doesn’t want to call this a trend yet, but says this can have a real effect on the gross domestic product.

I wanted to talk about this article, because it expresses the heavy consequences of the crisis and the link with corporate finance. This article shows us how many companies in the USA seem to use money from loans,etc. to finance their investments.
In my opinion, companies always have to borrow money to a certain level to be healthy. You do always have to consider a healthy balance in loans and for instance money from shareholders, so in difficult times you are always able to pay back. Especially for smaller companies, it is something they have to be aware of, because as was said in the article, they are mostly not the ones that have benefited from the small recovery the economy has already made after the recession in 2007. You can see they are more aware as the index dropped 20 % in August.
I think it’s a great article about corporate finance because it shows from one side how many American companies choose to finance their business and on the other hand, because it focuses on some of the dangers some types of corporate finance can have. How for instance a crisis can endanger the repayment of companies’ debts.

You can read this article on:

http://www.reuters.com/article/smallBusinessNews/idUSTRE59028B20091001

Until next week!

Lien

Definition of corporate finance

The division of a company that is concerned with the financial operation of the company. In most businesses, corporate finance focuses on raising money for various projects or ventures. For investment banks and similar corporations, corporate finance focuses on the analysis of corporate acquisitions and other decisions.