4th Dec 2009 by Tom Lindmark
I've never heard of a parent loan but I suspect that you might be referring to a loan to a holding company that owns a group of companies, hence it is the parent company. Basically, such a loan would be made to the parent company for any number of reasons. They might borrow to relend themselves to some of their subsidiaries or they might borrow to buy another company. In banking loans to holding companies are tricky because the hard assets that a bank might look to in a default are located in the subsidiaries of the holding company. Therefore, loans to holding companies usually require extensive legal documentation to ensure that the bank has recourse to the assets in case of default.
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