Question

Describe the limitations of loans from financial institutions.

Discuss the disadvantages of raising loans from financial institutions.

Answer 1

1. The concern requiring finance from public financial institutions has to submit, itself to a thorough investigation that involves a number of formalities and documents.
2. Many deserving concerns may fail to get assistance for want of security and other conditions laid down by these institutions.
3. Sometimes, these institutions place restrictions on the autonomy of management. They lay down a convertibility clause in loan agreements. In some cases, they insist on the appointment of their nominees to the Board of Directors of the borrowing company.