Borrowing Purposes and Credit Analysis [Retro-Learning Course]

Corporations request credit facilities for a variety of reasons, and examining the reason why a company borrows is critical for evaluating a loan request. It is important to make sure that the reasons for borrowing are legitimate and that they reflect the business strategy of the corporation. Companies may request credit for normally occurring, general corporate purposes, such as to cover cash flow shortfalls and inventory build up. At certain times, companies may need credit facilities for specific, usually non-recurring, large expenditure purposes, such as plant expansion or acquisitions. Each of the different purposes suggests an appropriate type of borrowing. This unit will discuss the different needs of borrowers and address the appropriate credit options for particular credit situations.