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 evaluate Anita and Mark's ability to repay the loan. This involves checking their current income, cash flow, and existing obligations to ensure that they can meet the repayment terms without financial strain.
Step 2
Credit Rating/History
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The bank will assess their credit rating and history. A positive credit history reflects reliability in repaying previous debts, while a poor credit score may raise concerns about potential default.
Step 3
Details of Owners' Management
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The bank will consider the qualifications and experience of Anita and Mark in managing their business. A strong management team can enhance the bank's confidence in the successful use of the loan.
Step 4
Collateral/Security for the Loan
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The bank may require specific collateral to secure the loan. This could include property or equipment related to their DIY/hardware business, which provides a safety net for the lender in case of default.
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