financial debt – To begin understanding when a financial debt prescribes, it is necessary to first understand what this form of debt entails. Financial debt, to define it as a concept, is the collection of credits received from banks and other creditors, such as bondholders, in response to pure fund contribution operations. It is determined to be the sum of a company’s bank debt and securities issuance, both short and long term. Without a doubt, it is the most important measure of a company’s leverage, and we will distinguish between two sorts later on: gross financial debt and net financial debt.
The price is set. The other cost, on the other hand, is a fixed expense. The issuance of a bond might result in this type of expenditure for a corporation. These bonds are a type of market-based funding for businesses. This equates to or commits to the payment of a predetermined percentage, which is also associated with a specific duration.
Financial debt prescription
When it comes to debt prescription, there are usually associated deadlines that are set and examined on a regular basis. In this situation, legal actions to recover bank loans, such as the one we’re discussing in this post, terminate or expire after five years, both for interest and principal. This includes debts owed to banks for non-mortgage loans, as well as debts owed to the credit cards themselves.
When it comes to debt, it’s also necessary to consider the hazards of the financial debt we’re dealing with. When examining a company’s debt, it’s important to distinguish between two sorts of risks: one of commercial origin and one of pure financial origin, which we’ll go over in more detail later. When it comes to financial debt, the Bank of Spain’s figure is particularly relevant because credit facilities issued must be reported to the CIRBE, which must distinguish between two possible defined risks:
Commercial origin risk: this form of risk is linked to the Banks’ paper discount lines, also known as factoring activities, which are used to make commercial credit advances. Bills and promissory notes are commonplace and on the order of the day.
Purely financial risk: now is the time to discuss this other sort of danger related with financial debts. Because it is tied to financial operations such as loans or credit accounts, it is much easier to comprehend: it is the risk that credit itself entails.
Financial Debt Types
We mentioned at the start of the article that there are two sorts of debt related with financial debt. And now is the time to get to know them and understand the differences between net and gross financial debt. When it comes to assessing the financial health of governments or corporations, both notions are fundamental. Finally, it is critical to remember this, particularly during times of crisis such as the ones we are facing.
The net financial debt represents all of a company’s liabilities as well as all of the money it owes. As a result, this section includes both short-term obligations, which must be paid within a year, and long-term debts, which must be paid beyond a year. It can also be linked to a government, because net debt is calculated by subtracting a government’s financial assets from the total amount of gross debt.
Financing requirements increase when market turbulence causes companies and organizations to encounter challenges. These funding requirements are referred to as sources of financing, and they are tied to the assets that the companies hold at the time of the financing agreement. Own funds and financial debt, which we will discuss in this essay, are the two types of financing available at present time. This debt can be contributed by a variety of companies, although it is most commonly contributed by financial institutions such as banks.
Knowing everything there is to know about financial debt will help a corporation make better judgments when the time comes to use it. To be able to recover financial health and allow our company to regain its performance, we must choose better terms, quantities, and sign for what we will actually be able to refund. It is critical to make a decision on this subject. Managing a business is a difficult endeavor, but the Registry of Judicial Defaults aims to make it a little easier by disclosing all relevant information, in this case, regarding the financial obligation.
Remember that the RIJ is a groundbreaking online platform created by the General Council of Lawyers, specifically for lawyers, that allows them to optimize their traditional collection procedures through an automated process of claiming debts with a final judicial resolution that concludes, in the event of non-payment, with publication of these in the RIJ solvency and credit file, affecting the debtor’s credit capacity and business reputation. Through its partner Informa D&B, it consults all of Spain’s collegiate members as well as the country’s financial and commercial system, enhancing the recovery rate.