Conditions under which Loans Are Ideal
a) Whenever the company's gearing level is low as the level of outstanding loans is low.
b) The company's future cash flows as inflows and their stability must be assured. The company must be capable to repay the interest and the principal.
c) Economic conditions prevailing. The company should have a long-term forecast of the prevailing economic condition. Boom conditions are perfect for debt.
d) Whenever the company's market share agreements stable sales.
e) Whenever the company's anticipated future expansion programs, validate such borrowing.