Primary source of repayment
What is the primary source of repayment on a business loan?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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The primary source of repayment is the cash a loan is expected to be repaid from in the ordinary course — for most business lending, the borrower's operating cash flow; for a development loan, the sale of the units; for a trade loan, the payment for the goods it financed. A credit decision is mostly a judgement about whether that source is real, sufficient and timed to the repayments. Security and guarantees are the second way out, and a loan whose only credible source of repayment is its security is a loan the bank expects to enforce.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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