1. The interest rates charged are usually higher than if it could have been issued to the market as a bond.
2. The business entity may be forced to pay principal and interest even if business entity is making a loss.
3. It increases the financial risk of the business entity due to increase of fixed commitments.
4. Some restrictive covenants may impact negatively on operations of the business entity e.g. on cash flows and dividend.
Lellah answered the question on November 8, 2021 at 07:25
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