Bank Loan
Money borrowed from bank to be repaid with interest over agreed period.
Formula
Total Repayment = Principal + (Principal × Interest Rate × Term)
Real World
When Leon restaurant chain needed to fund expansion, it secured a £5m bank loan with fixed monthly repayments, giving its finance team certainty for cash-flow forecasting over five years.
Exam Focus
Always evaluate suitability by linking loan term and repayment to the business's expected cash-flow timing — a common mark-scheme criterion.
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