5.14 Comprehension questions

1. What is the difference between a revocable letter of credit and an irrevocable letter of credit?

2. Who can utilize a letter of credit?

3. When does the bank prepare a transferrable letter of credit?

4. When is the revolving letter of credit used?

5. What is the purpose of a traveller’s letter of credit?

6. Why do foreign banks have to issue confirmed letters of credit?

Lesson 6

Active vocabulary

1. Study the following words and phrases:

to last (v)	- длиться, сохраняться
start up	- начальный
on top of that	- сверх того
venture (n)	- риск, рискованное предприятие
equity (n)	- эквивалент, чистая стоимость
policy (n)	- полис
to build up	- взращивать
surrender (n)	- сдача, выдача; отказ
surrender value	- выкупная стоимость (сумма, возвращаемая отказавшемуся от страхового полиса)
policy holder (n)	- владелец полиса
to vary (v)	- изменяться
variable (adj)	- изменяющийся, способный изменяться
installment loan	- ссуда, погашаемая в рассрочку
to tie (v)	- привязывать
tied to	- связанный с (чем-либо)
to afford (v)	- позволять себе, иметь возможность
ownership (n)	- владение
share (n)	- часть; акция
shareholder (n)	- акционер
intermediary (n)	- посредник
within (prep)	- внутри, в рамках
initially (adv)	- изначально
high tech (high technology)	- высоко-технологичные
branch (n)	- ветвь, отрасль, филиал
to gain (v)	- обретать, завоевывать
to buy out	- выкупать

6.2 Read and translate the text Starting - up financing

1. The young businessman must find sources of money that will last until revenue begins to exceed cash outflows. He must be cre­ative in finding start-up funding. New small businesses can start with the businessman’s own assets. On top of that, start-up financing may come from friends and relatives. The larger businesses can obtain funds from venture capital investors.

2. One of the personal assets the businessman can use to raise funds for the business is his home. The value of the home that the owner has paid for is called the owner’s equity in the home. By pledging this equity, the homeowner can obtain a second mortgage or a home equity loan. A businessman can find another source of start-up financing by a life insurance policy. Many policies build up cash surrender value – the money that the policy holder can borrow at a low interest rate.

3. Those who need more funds can obtain a variable rate install­ment loan. It is a personal loan with an interest rate tied to the prime rate or some other index. When the index changes the rate changes in the same direction. Some good sources of start-up funds are family members and friends. Many people can afford to lend at a low interest rate. The lender can share ownership of the business or can become a partner or shareholder in a corporation.

4. In some cases new companies can obtain cash from venture capital firms. These financial intermediaries specialize in funding ventures with good promise and invest in businesses which generate high profits within five years. Initially venture capital firms invested in high-tech industries, but now other branches enjoy this kind of financial aid, especially those working in the health-care field. The venture capital firms provide seed money to start a new company, funds to help the venture grow and gain the market and money to buy out a business.