Limited leverage is good for the organization. Frank Smith has considerable experience and good client base in the location. It is providing more advantage to Frank Smith for approaching the bank. Taking loan has the benefit to the business (Nolo, 2007). Interest is paid on the amount of loan borrowed from the business. Banker will require more information about the business and their future only before the sanctioning loan.
Frank Smith should make a regular payment towards the loan even without missing one installment. The lender will not interfere in any of the business decisions made by the business. There will be no interference by the banker into the business. Frank Smith will have the same independence how he had before obtaining the loan from the bank. The lender will not have any share of the profits generated by the company. There will be no transfer of the ownership of the business to the bank.
Similarly, it will reduce the burden of required capital to be invested in the company (Nolo, 2007). Interest payment made towards the loan will provide