Outline four factors that the bank would take into account when deciding on whether to grant a loan to Anita and Mark - Leaving Cert Business - Question A - 2006
Question A
Outline four factors that the bank would take into account when deciding on whether to grant a loan to Anita and Mark.
(20 marks)
Worked Solution & Example Answer:Outline four factors that the bank would take into account when deciding on whether to grant a loan to Anita and Mark - Leaving Cert Business - Question A - 2006
Step 1
Ability to repay
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Answer
The bank will assess Anita and Mark's ability to repay the loan based on their current income levels, cash flow from their business operations, and projected future revenues. A strong indication of financial health increases their chances of loan approval.
Step 2
Credit Rating/History
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A good credit rating indicates that Anita and Mark have a history of meeting their financial obligations. The bank will look at their credit reports to ensure they have no significant defaults, which could affect their trustworthiness as borrowers.
Step 3
Details of owners' management
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The bank will evaluate the management competence of both Anita and Mark. They will consider their qualifications, experience in the DIY business sector, and past business successes, as these factors indicate that they are capable of running the business effectively.
Step 4
Collateral/Security for the loan
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The bank may require some form of collateral to secure the loan. This could include business assets or personal guarantees. Having sufficient collateral offers the bank protection in case of default.
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