188体育

In the example at BLM71010 there is not a loan in legal terms but the net result is the same. The Borrower gets 拢10 million by parting with their property at the outset and repays the 拢10m with 鈥榠nterest鈥� in Year 10. Ignoring tax and any modest actual rent, the interest on a 拢10 million loan compounded at 10% for ten years at annual rests is 拢16 million. So the lump sum the lender has to pay under the option is 拢26 million. In practice, the bank would charge less than 拢26 million because of the tax savings on the 拢16 million 鈥榠nterest鈥� turn. Only a single sum would be paid by the Borrower - the 鈥榠nterest鈥� element is not identified separately.

There may also be an added benefit to the Bank from capital allowances. In the example given above capital allowances might have been given on 拢10 million - perhaps 拢9 plus million if 25% writing-down allowances applied by the time the option is exercised. But the net cost to the Bank is nil because it effectively recovers the 拢10 million cost.