Stretch Loan

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DEFINITION of 'Stretch Loan'

A loan that is extended to another party, either an individual or subsidiary company, that requires a large proportion of the party's cash flows to service the loan on a monthly basis. Usually, this benchmark is 50% of the party's gross income or more.

INVESTOPEDIA EXPLAINS 'Stretch Loan'

Stretch loans are extended to those individuals or companies that are in dire need of financing. Due to the relatively higher default and financial risk, lenders may require collateral or a large initial down payment before making a stretch loan.

RELATED TERMS
  1. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Financial Risk

    The possibility that shareholders will lose money when they invest ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Down Payment

    A type of payment made in cash during the onset of the purchase ...
  6. Debt Relief

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RELATED FAQS
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