What advantage do larger firms have when borrowing money from banks?

Larger firms typically have more established credit histories, stable cash flows, and greater assets which increases their reliability in the eyes of lenders. This allows them to secure loans more easily. Additionally, since larger firms are perceived as lower risk due to their size and operational stability, banks are often willing to offer them loans at lower interest rates compared to smaller firms. This phenomenon stems from the idea that the financial health and reputation of the firm make it less likely to default on a loan, thereby attracting more favorable borrowing terms.

In contrast, borrowing larger amounts without approval does not accurately reflect the general lending practices, as approvals are usually still required regardless of the firm's size. Governmental regulations pertain to various aspects of borrowing but do not specifically favor larger firms in this context. Furthermore, while collateral may be a requirement for any loan, it does not specifically pertain to the advantage that larger firms have when obtaining loans.