Lending Agencies

Sometimes, large scale development projects (e.g. construction of a new airport) may require heavy investments which may not be feasible for our company to bear alone. In such cases the government may obtain loans from donors and other types of lending agencies to finance the project. In such cases the government would enter into an agreement with the lending agency through which the funds will be secured to finance the project. The agreement may require the company to pay the interest on the loan or even the repayment installments either fully or partly on behalf of the government.

In such cases, even though the agreement is with the government, when the company is bearing the responsibility of repayment, the wellbeing and sustainability of the company would be of concern to the lending agency. If the company is not in a position to honour its repayment obligations then unless the government could find alternative means of repayment, the agency which invested in the project by granting the loan will be affected.

On the other hand if the company is able to discharge its repayment obligations fully and completely, then the lending agency would have earned a substantial profit on its investment by way of the interest repaid.

Either way, the lending agency would be interested in the well-being of our company and in that sense they would become our stakeholders.