Loan Strip

AAA

DEFINITION of 'Loan Strip'

A type of commercial loan sale whereby funding for a long-term loan is acquired from other lenders. A loan strip is a share of a long-term loan (such as a five-year loan), in which the loan-strip holder receives the agreed-upon amount at maturity. The maturity is usually short-term (often 30 or 60 days). Under certain circumstances, these strips may be classified as borrowed amounts.

INVESTOPEDIA EXPLAINS 'Loan Strip'

Regulators in the banking industry will classify a loan strip as a borrowed amount if the initial investor decides not to renew the loan and cannot be replaced by another. When this happens, the strips are then classified as deposits and become subject to the reserve requirements as set forth by the Federal Reserve.

RELATED TERMS
  1. Loan

    The act of giving money, property or other material goods to ...
  2. Reserve Requirements

    Requirements regarding the amount of funds that banks must hold ...
  3. Co-borrower

    Any additional borrower(s) whose name(s) appear on loan documents ...
  4. Credit

    1. A contractual agreement in which a borrower receives something ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Straight Credit

    A type of letter of credit. A straight credit can only be paid ...
Related Articles
  1. Promissory Notes: Not Your Average IOU
    Personal Finance

    Promissory Notes: Not Your Average IOU

  2. Payday Loans Don't Pay
    Options & Futures

    Payday Loans Don't Pay

  3. Different Needs, Different Loans
    Options & Futures

    Different Needs, Different Loans

  4. How Bank of America Holds 1/8 of All ...
    Stock Analysis

    How Bank of America Holds 1/8 of All ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center