ABSTRACT
Loan capital is the rather grand name attached to a company’s borrowings (so remember that your overdraft is your loan capital); borrowing is an important method of financing for many companies. Loan capital can be divided into two categories. First, sums owed by the company as a specific debt, for example a loan from X, the most common example of which is the company’s overdraft; and, secondly, marketable loans. Marketable loans are in essence potential debts which may be issued (sold) to investors. These loans will be issued on strict terms and conditions relating to date when the interest is due, date of redemption and other rights attaching. A company could create £1 million of marketable debt divided into £1 units bearing interest at X%, which it can sell as and when required and for whatever price it will fetch (there is no prohibition on issuing a loan at a discounted price unless it is convertible into shares). If £1 of redeemable debt is sold at a discount, the owner at redemption, who receives the face value of the debt and not the issue price, will make a capital profit. Marketable loans are frequently known as bonds. Individual loans or marketable loans may be secured by a charge or unsecured; much of the law in this area concerns company charges. Fashions in marketable loans vary. The highly specialised rules relating to international or euro bonds fall outside the scope of a company law syllabus.
