9.6 Bank and institutional loans Flashcards
1
Q
Why are bank/institutional loans usually the most popular among companies?
A
They are quick and straightforward, and can be made flexible depending on the purpose of the loan.
2
Q
Why do banks usually only offer long term loans to established businesses?
A
Because they will usually have a better credit profile and be lower risk.
3
Q
What is a covenant?
A
A promise in any debt agreement that a company will remain within a pre-determined range of financial measures and performance.
4
Q
What are some examples of typical banking covenants?
A
Remaining within pre-defined:
- liquidity ratios
- leverage rations
- efficiency ratios
- profitability ratios
- market value ratios
