How do commercial lenders earn a fair profit?
The cost structure of a commercial lender such as GEFF is not unlike that of a manufacturing concern. Where a manufacturer incurs cost of goods sold, GEFF incurs interest expense from raising funds in capital markets. Like nearly all businesses, GEFF also incurs overhead expenses such as salaries, operations, insurance, etc. Where a manufacturer earns income by selling its goods, GEFF earns income by charging interest on the money lent. A portion of GEFF’s income comes from fees charged to the borrower to help recover initial costs in putting a transaction together and to contribute toward earning a fair profit. GEFF raises funds for lending in the commercial paper markets. In fact, GEFF is the world’s largest issuer of Commercial Paper. back to top…
