One of the reasons for choosing entrusted loans instead of direct loans is that entrusted loans are less risky and can reduce the bad debt rate. The process of entrusted loan is usually: after the client and the borrower reach the financing intention, the loan amount, interest rate, term and other conditions are determined through consultation, and then the two parties open a settlement account in a commercial bank and apply to the bank. Customers also need to issue loan authorization letters to commercial banks. After accepting the entrustment application, the bank will review it, and if it passes the examination, it will accept the entrustment of qualified customers. Subsequently, the two parties signed a loan and guarantee contract and went through the mortgage/pledge procedures. After going through the formalities, the bank will allocate funds. In short, entrusted loan means that one party provides a loan to the other party and manages it with the help of a third party (commercial bank). Commercial banks do not bear the risk of loan losses. In addition, entrusted loans can also circumvent the ban on inter-company lending, because direct lending between companies is prohibited.

What is entrusted loan?

Entrusted loan is a way that the principal provides funds to the trustee, and the trustee issues loans according to the loan object, term, interest rate, use and other conditions determined by the principal.