A lender is an entity that makes cash loans to other entities or individuals in exchange for either a fixed or variable interest rate and a promise of repayment. Lenders are needed for several reasons, including the following:
- To provide funding for major purchases
- To increase the amount of working capital funding
- To provide a backup line of credit to support irregular cash flows
Lenders may choose to offer only certain types of loans, or to restrict their lending activities to certain types of entities. For example, a lender may specialize in mortgages to individuals, or lines of credit to businesses.