Loan capital - an integral element of money circulation

Loan capital is money that is provided on a loan basis at certain interest rates. It is an integral part of the developed economy and allows you to redirect free funds of citizens and legal entities in the area that require funding. Inaction of money contradicts the principles typical for Western countries, therefore, entrepreneurs are constantly in search of the most profitable proposals, which will allow them to obtain additional profits in the future. However, deposits can be made only in cases where there are high requirements for borrowed funds in the country .

Sources : Loan capital consists of several sources. It is based on money allocated for the re-creation of fixed assets and directed to the depreciation of equipment. It also includes the share of current assets that are released when the time frames for the sale and production of goods do not coincide. Another source is variable capital, formed in the interval between the receipt of money after the sale of products until the issuance of wages to employees of a particular enterprise.

Another component is the surplus value, which is intended for capitalization and is accumulated in accordance with the size of the plant and its technical equipment. Loan capital has another source - it is free cash resources of citizens, derived from personal income and converted into savings.

Features : It is believed that monetary circulation and credit are interrelated, since savings must be diverted to other areas of the economy. Capital is property, and its use can bring profit to the owner and borrower. So, when you provide your own funds on credit, the person who owns the savings receives income in the form of interest, and the enterprise that uses the loan for the development of production increases its profit after the sale of the products.

Market : The modern loan capital market allows the owners of money to receive income in the form of interest, which becomes a kind of surplus value. Its structure is heterogeneous, and primary investors, specialized intermediaries and borrowers become the main participants. The main segments are the mortgage, stock and money markets, where loan capital is used, directed to the implementation of credit operations.

The primary investors are owners of free cash. Specialized intermediaries are financial and credit organizations that perform direct accumulation of citizens' money and channel these resources to grant loans. The borrowers may include the state, as well as legal entities and individuals that are seriously short of cash and ready to pay more for their temporary use for their own purposes.

Necessity : In a market economy without credit relations, it is impossible to get by, because by issuing loans it is possible to speed up the process of monetary circulation. Other advantages are the opportunities for the implementation of a full-fledged investment of free money in the industry, the financing of which will lead to the formation of a new surplus value. With the help of loans, the development of productive forces in a single state is stimulated, and the process of formation of sources of capital is accelerated, which is directed at reproduction, which is possible due to the achievements of scientific and technological progress.