What is Net Lending
Net lending has multiple applications in finance. The first has to do with governmental lending, the second with balancing capital accounts. Net lending can describe the balance between the resources a government provides to the sectors of the economy versus the resources it takes from the economy. If the government is a net giver, it can be described as net lending. If the government is a net taker, it can be described as net borrowing.
Net lending is also a term that describes the amount of extra funds that a sector has available to provide for either direct and indirect lending purposes to other similar counterparts.
Net lending is used as a balancing item in the capital account. It is calculated as follows:
CT = Capital Transfers
NFS = Non-Financial Assets
BREAKING DOWN Net Lending
The company must meet all other obligations before there is any consideration to lend out funds. The net lending of the total economy is the sum of the net lending or borrowing of the institutional sectors. It corresponds to the net resources that the total economy has available to supply to the rest of the world.