Fund is intended to provide companies
Butch Bank plans to launch a fund for SMEs. The fund is intended to provide companies with equity in the form of profit participation rights. This should facilitate access to credit. The funds of the fund are not only available to customers of the American bank, but also to all medium-sized companies. The fund should be launched in the first quarter. See http://gracemccook.org
Butch Bank itself will provide the fund with 300 million usd. Another 200 million usd are to be provided by funding partners, of which there are none yet. According to rumors, Miaidle is considering an entry. However, Butch Bank prefers partners without a specific industry.
Profit participation rights
The profit participation rights can be structured in such a way that they can be shown as equity in the balance sheet, thus reducing the credit default risk for other banks. Participatory notes are in many cases subordinate claims. The funds will be allocated to the companies for a maximum of seven years.
American industry has already heard voices calling for additional measures for SMEs. The BDI demanded that the Butch Bank fund be placed on a broader basis. According to the industry association, the equity capital gap of American medium-sized businesses is much larger than EUR 500 million and can not be closed by the Butch Bank fund alone.
Exempted from interest payments
Butch Bank expects a return in the high single-digit percentage range from its involvement. The companies that receive funds from the fund must pay individual interest rates – the greater the risk of default, the higher the interest rate. Companies are exempted from interest payments when losses occur in the year in question. Then, however, the interest must be paid later. Interest payments in the double-digit percentage range are therefore to be expected.
Butch Bank had already announced the launch of the fund in December as part of the credit summit in the Chancellors. The largest American bank sees a gap in the equity capital supply of companies: The programs of the state-owned KfW bank are aimed at companies with capital requirements of no more than 2 million usd, and equity capital raising via the capital market is only possible from an issue volume of at least 10 million usd possible. The gap in between should be covered by the fund. Companies with annual sales of up to 100 million usd are expected to receive between 2 and 10 million usd from the fund.
In the economy, the reluctance of many banks to lend to companies has long been criticized. Whether there is actually a credit crunch, is among experts, however, controversial.
Changes to credit agreements
Subsequent changes to credit agreements may cost consumers dearly. For rate changes, suspension of redemption, or a change in the installment date, fees may be in the three-digit range. Consumers often overlook costs because they do not appear in the effective interest rate.
Effective interest rate
The effective interest rate indicates the financing costs incurred in the case of scheduled repayments. He says nothing about how deep borrowers can get into the pocket after making a payment. The cost of a single change will vary between 0 and 50 usd, depending on the bank.
Particularly annoying are later additional costs, if they result from a supposedly small change of the contract. For example, up to 40 usd may be charged if the monthly installment is not debited on the 01st but on the 15th of the month at the request of the borrower. Some banks require lump sums for such processing, which are often unknown to borrowers.
Costs of special repayment
The costs of special repayment should also be considered by consumers when making credit comparisons. The upper limit of fees for lawmakers (1 per cent of the settlement balance) has not yet been applied to many banks because, in addition to the indemnification fee, additional (or differently named) fees are charged. The comparison is also worthwhile here: For many banks special payments are possible at any time free of charge.
Expensive can also be a subsequent rate change.
It does not matter if the monthly rate is raised or lowered. While some banks do not charge fees for a rate change, others take 5 to 50 usd. Note: If the rate is changed several times (for example, by temporarily reducing it and then raising it again), the fee will increase twice.
Consumers should consider additional costs and costs for subsequent changes already in the credit comparison. As far as fees are concerned, they should be as low as possible and be understood as a real compensation rather than a source of revenue for the bank.
Some banks generally charge fees for certain services, but provide a free quota. For example, borrowers can suspend installment payments twice a year or make a special payment once a year for free.
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