Question 8.RQ.2: What factors might a prospective lender take into account wh...

Financial Management for Decision Makers

What factors might a prospective lender take into account when deciding whether to make a long-term loan to a particular business?

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The lender may consider the following factors:
● Security for the loan.
● The performance record of the business.
● Likely future prospects of the business and the industry.
● The existing level of gearing for the business.
● Likely interest cover for the loan.
● The purpose of the loan.
● The expected level of return compared with other investment opportunities of the same level of risk.
● Restrictive loan covenants in place from existing lenders.

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