22. Financing a loan.

Borrowing money to buy an expensive item has become more and more common nowadays. If you want to buy something but don’t have enough savings, you could use of your bank’s credit facilities. A loan can be obtained from a commercial bank. You may be financing a loan during the next several years. The difficulty is that few people have any idea how to start this process and I would like to clear this situation for you, to give you some practical advice how to discuss a loan, to raise a loan and to pay off a loan. I consider it absolutely essential that borrowing intelligently requires an understanding of the three basic steps to negotiate a loan. Firstly, you should compare loan sources. Secondly, it is necessary to compute interest. Thirdly, you should determine repayment time.

I’m sure it’s also very important to mention that numerous loan sources are available to borrowers. Loans for major purchases can be obtained from credit unions, banks, finance, companies, or, for cars, the car dealers. If all other factors are equal, your choice will depend on which source will charge the lowest rate of interest.

When you want to gather some information and to call different loan financial institutions you should ask them what annual interest rate they charge on used loans and the method used to calculate repayment. It’ necessary for you to compare answers to find the best finance source. In my opinion, it is important to understand the two basic methods of figuring interest – simple and compound. If you want to be absolutely clear about some details concerning a personal loan, the following questions come to your mind: Must a reason be given for borrowing money? How long are you given to pay the money back? How is it paid back? How is interest calculated?

A specialist in making loans can give you full answers to the above questions. He could explain you that the borrower must give the reason for waiting money. Usually 6, 12, 18, 24, up to 60 months are provided to pay the money back It is the usual practice that repayments are made monthly from a current account. As to interest, using the simple interest method, the borrower repays the principal – the amount borrowed – and interest in one single payment to the lender. For example, to purchase a car one would like to borrow $2,000 at 8 percent interest. He will repay the loan in 12 months. Interest can be calculated using the formula I=P*R*T. In the formula, I is interest, P is principal, R is rate of interest (percent), and T is time, in years, before the money is repaid. Hence, $2,000*0.08*1=160 – the amount of interest charged. The total to be repaid of the year is $2,160 – that is, $2,000 principal plus $160 interest. The repayment schedule for most loans actually is calculated by using compound interest – the add-on method. Payments are broken into even parts – 12 months, for example – and that portion – one-twelfth – of interest and principal is paid back each month. Using the add-on method, the borrower must know the annual percentage rate (APR) or total finance charge on the loan rather than just the loan interest as in simple interest. If a monthly payment plan were used, repayment of a $2,000 at 8 percent would cost you approximately $180 per month - $2,160 divided by 12 months. Using a monthly repayment plan, you have possession of the entire $2,000 you borrowed for only one month. Then you are paying the loan back in equal portions. Monthly repayment of the principal and interest increases the annual percentage rate (APR) from 8 percent to 14.8 percent. I would also like to stress that it is not necessary to know how to calculate this APR. Another point is that by law the lender must tell the borrower the rate. And in conclusion to this part I would like to add that using the APR as a guideline, borrowers can more easily decide which loan is best suited to their purposes.

So, I reckon, it’s absolutely clear to you know that interest rate is one important factor that affects the cost of a loan. As to the other factor that influences the cost of a loan it is the length of time before the loan is completely repaid. Borrowers tend to see the lower monthly payments on long-term loans as an advantage. But they often fail to realize that a longer repayment time increases the total cost of the loan. So you’d better base your plan on exact calculations.

23. “Harper & Grant Ltd.” The history of the company. The company’s structure and development.

The company of Harper & Grant Ltd. was started forty-two years ago by Ambrose Harper and Wingate Grant. Wingate Grant died many years ago, and his son Hector is the present Managing Director. Ambrose Harper is the Chairman. He is very old man and he comes to attend the board meetings and keep an eye on the business.

The company started by making steel wastepaper bins for offices. These wastepaper bins are more safer than the old type of basket made of cane or straw. Wingate Grant captured a big contract with government offices.

From wastepaper bins, Harper & Grant began to manufacture other items of office equipment: desks, chairs, cupboards, filing cabinets and smaller objects, such as filing trays, stapling machines and so on, until now when there are fifty-six different items listed in their catalogue. All items are made of pressed steel.

The factory consists of. These are divided into the Tool Room, Works Stores, Press Shop, Machine Shops, Assembly Shop, Paint Shop, Inspection, Packing and Despatch Departments. There is also the Warehouse.

The firm has a history of slow, steady growth. But Peter Wiles - Production Manager, and John Martin - Sales Manager think that they should be more adventurous. They want modernising a business by using modern things to run a business such as electronic data processing, Discounted Cash Flow, budgetary control, corporate planning, P.E.R.T. (Project Evaluation and Review Technique), automa­tion, etc. Harper & Grant Ltd., like their rivals, must get right up-to-date and enlarge their business, or they will be outpaced by a firm whose business organisation is better than their own.