Stretch Loan


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.

BREAKING DOWN '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.

  1. Financial Risk

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

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

    Property or other assets that a borrower offers a lender to secure ...
  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. Tenured Capital

    Loans offered by the government to key business sectors.
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