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It is written in book, if business is having negative cash flow forecast so bank would be reluctant to give loan even if security available.
What is reason behind this? Bank can take its loan amount by selling the security so why it is hesitating to offer loan?Negative cash flow usually means the business is losing money, or is likely to have cash flow problems. Therefore it is less likely that the business will be able to repay borrowings.
Making use of the security for the loan can be time-consuming and there can be bad publicity if the bank causes a business to close. Akso
there is a risk the security does not cover the loan.
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