IMPROVING THE INTERPRETATION OF THE TERM "LOAN

CAPITAL OF AN ENTERPRISE

The primary purpose of capital formation is to meet the needs of an enterprise in
the acquisition of the necessary assets and optimization of its structure from the
position ensuring conditions for effective use of it. Depending on who owns material
means and cash, that are invested in economic activities, there are capital two types
of capital: equity and loan capital.
Various scientists in the field of finance pay attention to the study of the essence
of loan capital. This caused the necessity of generalization of the essence and content
of the concept.
According to Provision (standard) of accounting 11 "Liability" liability is a debt
an enterprise, which have arisen as a result of past events and the repayment of which
in the future is expected to lead to the reduction of the company's resources, which
embody the economic benefits [1].
I.. Blank determines loan capital as "cash or other property values involved to
fund the development of an enterprise on a rotary basis. All forms of loan capital that
the enterprise uses, are its financial liabilities repayable in stipulated terms" [2, p.
214]. In this definition a number of essential characteristics of loan capital used,
namely: loan capital is the involvement and the obligation which is the main defining
feature, and reverse motion of loan capital. Indeed, it is necessary to return the money
involved or other assets to the creditor. This definition is quite clear, as it highlights
the essence of loan capital. However, to better clarify the definition the conditions for
attracting lack.
G.. Kramarenko is of the opinion that the loan capital is "... the capital of
banks and other organizations that is used by the enterprises in the money turnover on
the terms of a loan agreement" [3, p. 257]. Undoubtedly, the loan capital is the capital
of other entities used by an enterprise, but this definition is very general, it does not
contain the essential characteristics of loan capital, which could identify and analyze
it. The author emphasizes that enterprise uses such capital on the the term of loan
agreement, thus, identifying loan capital with the credit, but it is also quite impossible
to accept as loan capital has other forms of involvement as well that are not fixed by
the loan agreement, for example, liabilities for of wages.
A.M. Podderohin, considering the loan capital from the position of financial
management, formulates its definition as follows: "loan capital - funds raised to
finance economic activity of enterprise on the basis of timeframes, payment, return"
[4, p. 229]. It defines the basis of the intrinsic characteristics of borrowed capital:
these are the funds that are attracted by the enterprise; they are attracted for financing
activities, as well as the principles of their use (return, timeframe).
According to N.V. Naumova "loan capital is the value invested in cash or other
assets that are involved on the basis of return with the porpose for financial enterprise
development" [7, p. 8]. We agree with the fact that the loan capital is a contribution.
However, this definition is too identified with the investment. Also, the interpretation
of loan capital as the cost is irrelevant, because this characteristic can confuse. It is
important that it is indicated that such movement of resources is caused by some
necessity, which is a sign involvement as well loan capital.
O.V. Zayets gives the following definition of "loan capital - part of the capital
of the legal entity, which does not belong to him on the property rights and are
involved in the circulation on the basis of a loan - received bank or a commercial loan
or issue of securities [8, p. 119]. This definition is quite informative. The concept of
loan capital is expanding by the essential characteristics of the indicator of property
because loan capital can not be owned by the enterprise, it is only involved to use for
a certain period with its entire return in the future. Also, the adjusted loan forms are
possible, but the description of the existing types of loan capital are cumbersome and
impractical, given the variety of classifications and types of loan capital.
In conclusion, although all scientists give the definition of loan capital in
different ways, the meaning of this term is the same.
Thus modern literature considers the following essential characteristics of loan
capital:
- resources in the form of cash and property values;
- the process is directly related to attracting capital;
- a process directly related to the capital movement;
- reverse movement of raised capital;
- the movement of resources caused by certain necessity;
- obligation, debt to the creditor;
- provided by capital giver (banks and other financial and lending institutions,
suppliers and customers, owners, staff, state);
- the equivalent of value of property that was involved is returned to the creditor;
- a means of financing for development;
- concluded on the basis of the loan agreement;
- a process that has temporal characteristics;
- payment.
In authors opinion, it is necessary to expand the concept "loan capital" due to
such characteristics: loan capital management related with strategic, operational and
current management as loan capital management is part of activity of the enterprise at
the strategic, operational and current period. It is also necessary to identify such
characteristic that loan capital management is carried out within the existing financial
strategy and general, on the whole because it gives background and answer the
question to what extent it is necessary to attract loan capital and for what purpose,
orientation, determine the proportion "loan capital" to total capital structure.
Therefore, term "loan capital" means resources in the form of money or
property, that are involved from capitalgiver under the loan agreement for the
financing of economic activity and development on the basis of timeframe, return and
payment based on strategic, operational and current management of an enterprise.
Loan capital characterizes together amount of its financial liabilities, which are
recognized in the balance sheet of an enterprise and its management is carried out
within the existing general and financial strategy.