Solution

Funded loans - When bank provides credit facility with funds (real cash), it is called funded loan. For example,  •A term loan is a monetary loan that is repaid in regular payments over a set period of time.  •A demand loan is a borrowing where the lender is allowed to recall the loan on short notice. An example of a demand loan is an overdraft facility.  •Here, though the bank does not call for the borrower to repay, but the borrower can pay in full without any early repayment penalty.    Un-Funded Loans Un-funded or non-funded loans are like guarantees and documentary credits, where bank does not give any cash but take risks of the companies and charge commission for the same. Eg. Letter of Credit, Tender bonds, Bills Purchased – refers to demand bills and cheques, Bills Discounted