Question

Assess why firms or individuals involved in tourism need to borrow from a bank. Identify what a banker should be watchful of before extending credit to a tourism business in addition to enteral economic conditions.

Answer 1

Companies or individuals involved in the tourism business need loans for a variety of purposes. One of the major reason for loan is reconstruction or renovation of the hotel and other facilities of the company. Since the income of people and standard of living of people is improving day by day, they are now spending money on vacations and travelling. This leads to the tourists expecting good quality services. The differentiating factor among the tourist businesses is the quality of service that they are providing. In order to improve the quality of service, the company may have to take loans and renovate their hotel with modern day facilities.

Banker should be watchful of the fact that the business is a genuine one and they are properly registered. The documents regarding the authenticity of the business should be verified. The bank should also ensure that the business has sufficient scope of earning so that it can repay back the loan amount to the bank on time. The bank should also verify the assets owned by the business and assess its value.