Even big buisinesses need guaranteed loans

August 10, 2010

You're not alone if you need a personal loan. CC by lumaxart/Flickr
You're not alone if you need a personal loan. CC by lumaxart/Flickr

Corporate finance and personal finance aren’t as different as you might think. Some of the biggest companies need guaranteed loans, or a line of credit or short term loan. Even the Ford Motor Company got guaranteed loans. Ford is in debt relief mode, much like many other automakers. Mortgage backing giants Freddie Mac and Fannie Mae need more guaranteed loans just to scrape by.

Ford gets lines of credit — but doesn’t use them

To keep from needing bailout money and filing for bankruptcy, Ford Motor Company took out $23.5 billion in guaranteed loans from the government. Ford didn’t need a bailout, the company only asked for lines of credit to be set aside just in case. Not asking for emergency loans from the government was a wise business decision. According to the Wall Street Journal, Ford’s sales shot up 22 percent as GM and Chrysler floundered. Sometimes just knowing that cash is available if necessary can a confidence boost.

Mortgage giants need more guaranteed loans

Freddie Mac and Fannie Mae, the companies that back more than half the mortgages in the U.S., need more in taxpayer funded guaranteed loans. Freddie alone lost $6 billion over the second quarter this year, according to ABC. The firm is asking for another $1.8 billion. Freddie and Fannie are struggling, and they have until 2012 to get their affairs in order. At that point, Treasury Secretary Geithner won’t write any more checks.

Credit scores affect huge companies too

Ford will be able to get better loans, as the company pays off its debt and improves its credit score. Just like a person paying off his or her credit card to improve a credit score; it works for the biggest corporations too.

More information on this topic

Wall Street Journal: http://online.wsj.com/article/SB20001424052748703589404575417491742322262.html

ABC News: http://abcnews.go.com/Business/wireStory?id=11356950

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