A loan is a loan taken by a company, an organization or a State. The concept, which has its etymological root in the Latin word imprestito , is usually used when the loan in question is represented by securities , whether bearer or negotiable.
Loans, therefore, are made through promissory notes , bonds , bonds and other types of securities. That is why it can be said that they are loans granted by individuals, since they are the ones who acquire these titles.
Specifically, in this sense we can state that promissory notes are those issued in the short term, specifically less than one year, while simple bonds are issued in the short or medium term, between 3 and 5 years. Likewise, we must not forget the so-called debentures, which are issued over the long term.
Typically, a loan arises when a corporation requires a very high amount of financing, making it difficult to satisfy its need with a single lender. In this way, it divides the debt it needs into many securities (which function as small loans), which are purchased by different individuals (lenders).
In a loan, in short, there is a borrower (who issues the loan, requesting the loan through the issuance of obligations), one or more lenders (those who buy the obligation and, therefore, lend the money ) and a financial intermediary (the entity that is responsible for coordinating operations and the link between borrower and lender).
In addition to everything indicated, we cannot ignore the fact that the following concepts or terms really play a role in a loan:
-The nominal value, which is the value of the security on which the interest will be paid.
-The effective value. This is the concept used to refer to the value that the security has in the market at a given time.
-The issue value, which, as its name indicates, is the value that the title has at the time it is issued.
-The repayment value, which is the value for which the loan will be returned when the instant of its amortization occurs.
In the same way, we cannot ignore that two different types of loans can be differentiated today:
-Obligations without periodic payment, which are those in which the settlement of interest takes place in parallel with the amortization of the loan.
-Obligations with periodic payment, which are in which, on a regular basis, there is a settlement of the corresponding interests.
Let's look at a historical example to understand how a loan works. In 1822 , the Board of Representatives of the Province of Buenos Aires authorized the government to negotiate a millionaire loan whose funds would be used to build a port, develop a drinking water network and found towns. With this objective, a consortium was established on behalf of the government of Buenos Aires, which signed an agreement with the British company Baring Brothers & Co. This firm was in charge of acquiring the titles and placing them on the market, concluding a loan of 1,000,000 pounds sterling . The loan with its interest was only completed eight decades later: as if that were not enough, the debt contracted by Buenos Aires was not used for the original objective.