When assessing a new loan application, which aspect is generally of greatest interest to lenders?

When lenders evaluate a new loan application, they place significant emphasis on the borrower's capital structure. This aspect provides crucial insights into how the borrower finances their operations and manages their liabilities. A well-structured capital framework indicates a borrower's ability to balance debt and equity, showing how much of the business is financed through loans versus owner investments.

A strong capital structure often reflects financial stability and resilience, making the borrower more appealing to lenders. Lenders are interested in understanding whether the borrower has the capacity to handle additional debt without overextending themselves. This factor can offer a predictive measure of the borrower's ability to repay the loan, directly influencing the lender's decision-making process regarding the terms of the loan and the overall risk assessment.

Other aspects, such as business history and collateral, play important roles, but they do not provide as comprehensive a view of the borrower’s financial strategy as capital structure does. Projected revenue is also important but is dependent on various assumptions, making it less reliable compared to the tangible evidence of a well-designed capital structure. Understanding how these elements fit into the overall financial health of the borrower helps lenders make informed lending decisions.