What are the long-term loans? What is a long-term loan? Long-term loan contracts usually have clauses to protect lenders. Enterprises obtain long-term loans mainly to solve the investment needs of enterprises to purchase fixed assets and increase long-term use of current assets. Long-term loans are mainly repaid with expected income that may be generated by future projects. Long-term loans are risky, because the funds are used for a long time and there are many uncertain factors in future business. In order to ensure the safety of such loans, lenders usually add protective clauses when concluding loan contracts.

These protective clauses can be roughly divided into three categories. The first category is the clauses that require enterprises to maintain certain liquidity and solvency. For example, enterprises are required to maintain the minimum working capital, and borrowing enterprises are not allowed to increase other long-term Russian services. Long-term loans Long-term loans limit the total annual capital expenditure of borrowing enterprises, and long-term loans limit cash dividends and share repurchases to prevent capital outflows. The second category is the clause to prevent the borrowing enterprise from losing or transferring assets. For example, a long-term loan commitment borrowing enterprise shall not use any assets as other guarantees or mortgages. Under normal circumstances, it is not allowed to sell more assets. Require borrowing enterprises to operate legally, strictly implement long-term loans, and prevent asset losses caused by fines. The third category is to add some special requirements. For example, for long-term loans, if the principal responsible person of the borrowing enterprise plays a key role in the production and operation of the borrowing enterprise, the bank may require him to hold leadership positions continuously within the validity period of the loan contract, and for long-term loans, the enterprise may also be required to insure it. Long-term loans to borrowing enterprises with high investment risks may require enterprises to provide audited annual financial reports, quarterly financial reports and monthly financial reports to lending institutions.