Bank Loan
Money borrowed from bank to be repaid with interest over agreed period.
Formula
Total Repayment = Principal + (Principal × Interest Rate × Term)
Real World
Costa Coffee used bank loans secured against property to fund its rapid UK expansion before being acquired by Coca-Cola, giving it predictable monthly repayments that could be planned into cash-flow forecasts.
Exam Focus
Always weigh the fixed repayment advantage against the obligation to repay regardless of trading performance — mark schemes reward balanced judgement.
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