Letter Of Moral Intent

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DEFINITION

A letter to a bank from a parent company whose subsidiary is applying to borrow money from that bank. While not legally binding, the letter indicates the parent company's intention to continue financially supporting its subsidiary (to not sell it or shut it down) in an attempt to reassure the lender that making the loan would not be an overly risky decision.



INVESTOPEDIA EXPLAINS

While a letter of moral intent serves as reassurance to a bank that a parent company is on-side with a loan application, it does not serve as a formal guarantee by the parent for the subsidiary. This letter also shows that the parent company is aware of its subsidiary having requested the loan and approves.


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