Day Loan

Day Loan, extension of credit by a commercial bank for a period of a part of one day. A day loan is therefore a loan that matures the same day in which it is made. Day loans are ordinarily made to investment bankers to provide them with necessary funds to pay for a new issue of securities. On receipt of the securities, the day loan is paid either from the proceeds of the sale or from distribution of the securities. It may also be replaced by another loan with the securities as collateral. The need for a day loan arises from the fact that the investment banker must usually present a certified check in exchange for securities and therefore may need to borrow the money for a few hours before he can use the securities as collateral.